Oil Prices Decline Amid US and China Demand Worries, Fed's Mixed Signals

By IndraStra Global News Team

Oil prices faced a downturn on Monday, reversing gains from Friday, as apprehensions over diminishing demand in both the United States and China and ambiguous signals from the U.S. Federal Reserve impacted market sentiment.
As of 0800 GMT, Brent crude futures for January saw a decrease of 61 cents, or 0.75%, settling at $80.82 per barrel. Simultaneously, December's U.S. West Texas Intermediate (WTI) crude futures stood at $76.56, down 61 cents, or 0.79%. While prices had surged nearly 2% on Friday following Iraq's endorsement of OPEC+ oil cuts, they suffered a setback of approximately 4% for the week, marking the third consecutive weekly loss – the first such occurrence since May.
Hiroyuki Kikukawa, President of NS Trading, a unit of Nissan Securities, remarked, "Investors are more focused on slow demand in the United States and China while worries over the potential supply disruptions from the Israel-Hamas conflict have somewhat receded."
Last week, the U.S. Energy Information Administration (EIA) reported a slightly lower-than-expected rise in crude oil production in the United States for this year, coupled with a projected decline in demand. The forecast for next year suggested that per capita U.S. gasoline consumption could reach its lowest level in two decades.
Market concerns heightened following Federal Reserve Chair Jerome Powell's statement last week, indicating the possibility of interest rate hikes if progress in curbing inflation stalls. Analysts, like Tony Sycamore from IG, anticipate more hawkish statements from the Fed, given the looser financial conditions following a Friday surge in stock markets.
The weak economic data from China, the world's largest crude oil importer, further fueled worries about faltering demand. In October, China's consumer prices hit pandemic-era lows, casting doubts on the strength of the country's economic recovery. Refiners in China also requested reduced supply from Saudi Arabia, the world's leading exporter, for December.
Despite these concerns, oil prices may find support if WTI approaches $75 per barrel, according to Kikukawa. He added, "If the market falls further, we will likely see support buying on expectations that Saudi Arabia and Russia would decide to continue their voluntary supply cuts after December."
Saudi Arabia and Russia confirmed last week that they would extend their voluntary oil output cuts until the end of the year, acknowledging persisting concerns over demand and economic growth. OPEC+, consisting of the Organization of the Petroleum Exporting Countries and allies like Russia, is scheduled to meet on November 26.
On the supply side, U.S. energy firms reduced the number of operating oil rigs for the second consecutive week, reaching their lowest count since January 2022, as reported by energy services firm Baker Hughes. This decline in the rig count indicates potential future output reductions.
With reporting by Reuters

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