Oil prices fell on Monday, erasing gains from Friday due to concerns over waning demand in the United States and China, as well as mixed signals from the U.S. Federal Reserve. Brent crude futures for January were down 0.75% at $80.82 a barrel, while the U.S. West Texas Intermediate (WTI) crude futures for December were down 0.79% at $76.56.
Although prices gained nearly 2% on Friday with Iraq’s support for oil cuts by OPEC+, they lost about 4% for the week, marking their third consecutive weekly losses since May.
According to Hiroyuki Kikukawa, president of NS Trading, investors are more concerned about slow demand in the United States and China, while worries over potential supply disruptions from the Israel-Hamas conflict have diminished.
The U.S. Energy Information Administration (EIA) stated that crude oil production in the United States this year will rise slightly less than previously expected, while demand will decrease. The EIA also predicted that next year, per capita U.S. gasoline consumption could reach its lowest level in two decades.
Market sentiment was cautious due to the possibility of U.S. policy tightening after Federal Reserve Chair Jerome Powell’s statement that interest rates could be raised again if progress on curbing inflation stalls. With looser financial conditions after a jump in stock markets, there is a good chance of more hawkish Fed speak this week, according to market analyst Tony Sycamore.
Weak economic data from China, the world’s largest crude oil importer, has increased fears of faltering demand. China’s consumer prices fell to pandemic-era lows in October, casting doubts on the strength of the country’s economic recovery. Additionally, refiners in China have requested less supply from Saudi Arabia for December.
However, Kikukawa believes that oil prices will be supported if WTI approaches $75 a barrel. He expects support buying on expectations that Saudi Arabia and Russia will continue their voluntary supply cuts after December.
Top oil exporters Saudi Arabia and Russia have confirmed that they will continue with their additional voluntary oil output cuts until the end of the year. OPEC+ will meet on November 26 to discuss further actions.
On the supply side, U.S. energy firms have reduced the number of oil rigs operating for the second consecutive week to their lowest level since January 2022, indicating potential future output changes.
In conclusion, oil prices fell due to concerns over waning demand in the United States and China, mixed signals from the U.S. Federal Reserve, and potential supply disruptions. However, support buying is expected if prices approach $75 a barrel, and top oil exporters have committed to voluntary supply cuts until the end of the year.
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