In contrast to last Friday’s upward trend, the market saw an oil price decrease on Monday. This is due to renewed concerns about diminishing demand in the United States and China, which negatively impacted market sentiment.
“Investors are more focused on slow demand in the United States and China,” underscored Hiroyuki Kikukawa. He is the president of NS Trading, a unit of Nissan Securities.
Earlier in November, oil prices had already dropped to their lowest point in more than three months. Decreased demand in the said countries also prompted the price movement.
Read: Oil prices slide to 3-month low amid weakening demand from U.S. and China
Oil price decrease
As of 00:51 GMT, Brent crude futures for January were down 35 cents, or 0.4 percent. This settles the price at $81.08 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures for December stood at $76.82. This marks a decrease of 35 cents or 0.5 percent.
Both benchmarks saw a nearly 2 percent increase on the preceding Friday, thanks to Iraq expressing support for OPEC+ oil cuts. Nonetheless, they incurred a 4 percent loss for the week, which represents their third consecutive weekly decline since May.
Meanwhile, the US Energy Information Administration (EIA) reported a slightly lower-than-expected increase in crude oil production in the US this year, coupled with a decline in demand. Additionally, China, the world’s largest crude oil importer, sought to reduce December supply from Saudi Arabia, which is the world’s leading exporter.
With weak economic data from China, concerns over waning demand further grow.
Nonetheless, Kikukawa remains optimistic about oil prices if WTI hovers around $75 a barrel, anticipating support buying.
“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,” added Kikukawa.
Extended oil cuts
Before the news of today’s oil price decrease, leading oil-exporting countries Saudi Arabia and Russia had already announced that they intend to extend their additional voluntary cuts in oil output until the end of 2023. They cited ongoing demand and economic growth concerns, which are continuously affecting crude markets.
Specifically, Saudi will maintain an extra voluntary reduction of 1 million barrels per day (bpd), amounting to a production level of approximately 9 million bpd for December. On the other hand, Russia will continue an additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of the year.
OPEC+ has been implementing output reductions since the previous year as a proactive measure to maintain market stability. OPEC+ comprises members of the Organization of the Petroleum Exporting Countries and other oil-producing countries, including Russia.
Back in June, a decision made by OPEC+ already imposed supply constraints into 2024. OPEC+ will convene on November 26.
In the US, energy technology company Baker Hughes reported that American energy firms decreased the number of operating oil rigs for the second consecutive week, hitting the lowest count since January 2022. This signals potential impacts on future output.
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