Oil prices declined on Wednesday following industry data indicating a rise in U.S. oil inventories, while attention turned to U.S. diplomatic efforts aimed at easing tensions in the Middle East.
U.S. Secretary of State Antony Blinken engaged in extensive discussions with Israeli leaders this week regarding potential de-escalation of the conflict, while advocating for increased humanitarian aid to Gaza.
Economic signals from China
Additionally, the market kept an eye on economic signals from China, the world’s largest oil importer, amid ongoing worries about reduced demand in the country.
Brent crude futures for December fell 0.4 percent, settling at $75.75 per barrel, while West Texas Intermediate (WTI) crude futures dropped 0.4 percent to $71.45 per barrel by 21:00 ET (01:00 GMT).
U.S. inventory report raises concerns
The American Petroleum Institute reported that U.S. oil inventories rose by 1.643 million barrels over the past week, surpassing expectations of a 0.7 million barrel increase. This trend often precedes similar findings in official inventory data, which were set to be released later on Wednesday, raising concerns about a potential cooling in U.S. fuel demand.
Oil prices faced additional pressure from a strengthening dollar, as expectations of smaller interest rate cuts by the Federal Reserve lifted the greenback to its highest levels since early August.
Future oil price projections
According to Goldman Sachs, oil prices are projected to average around $76 per barrel in 2025, with the market likely experiencing a moderate surplus of crude and sufficient spare capacity among major producers to mitigate any supply disruptions. The investment bank noted that the risk premium for crude due to Middle Eastern tensions remains limited, as the ongoing Iran-Israel conflict has not yet affected regional oil supplies. Furthermore, analysts highlighted that major OPEC producers have considerable spare capacity, and the cartel recently lowered its oil demand forecasts for 2024 and 2025 while planning to increase production later this year.
Continued pressure on oil prices
On Tuesday, oil prices fell again as the U.S. diplomat escalated efforts to promote a ceasefire in the Middle East. Slowing demand growth in China continued to weigh on the market, with Brent crude futures for December delivery dropping 19 cents, or 0.3 percent, to $74.10 per barrel by 03:50 GMT. U.S. WTI crude futures for November fell 18 cents to $70.43 per barrel on its last trading day, while the more actively traded December WTI futures slipped 14 cents, or 0.2 percent, to $69.90 per barrel.
Price fluctuations amid market uncertainty
Both Brent and WTI had surged nearly 2 percent on Monday, recovering some of the more than 7 percent dip experienced the previous week. The ongoing conflict in the Middle East continues to create uncertainty regarding oil supply.
As of 5:22 GMT, Brent crude futures had risen 0.53 percent to $73.45 per barrel, and U.S. WTI crude increased by 0.66 percent to $69.68 per barrel. Last week, Brent saw a decline of over 7 percent, while WTI dropped approximately 8 percent, marking the largest weekly losses since September 2.
China’s economic measures and oil demand
In economic news, China announced a reduction in benchmark lending rates on Monday, following earlier cuts to other policy rates last month. This decision is part of a broader stimulus strategy aimed at revitalizing the economy, in light of data showing that China’s economy grew at its slowest pace since early 2023 in the third quarter, raising concerns about oil demand.
Read more: Global oil demand to reach over 100 million barrels per day by 2050: Saudi Aramco
Future outlook for China’s oil demand
Despite recent stimulus efforts, the International Energy Agency’s head indicated that China’s oil demand growth is likely to remain weak in 2025, as the second-largest economy transitions to electric vehicles while grappling with slower growth. IEA Head Fatih Birol warned that continued weakness in China will put pressure on global oil demand in the coming years. His comments followed the IEA’s recent downgrade of its demand growth forecast due to concerns over China, and OPEC’s similar adjustments to its global oil demand outlook.
Long-term trends in China’s oil consumption
China, the world’s largest oil importer, is facing a prolonged economic slowdown, which is expected to dampen its crude appetite. The increasing adoption of electric vehicles is also anticipated to further reduce fuel demand.
Saudi Aramco’s optimistic outlook
However, Saudi Aramco remains “fairly bullish” on China’s oil demand, particularly given the government’s stimulus measures aimed at fostering growth, as noted by the company’s leader on Monday.
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