Oil prices declined on Thursday in response to lackluster industry data regarding U.S. inventories, as markets looked for additional signals about demand from China and insights from the International Energy Agency (IEA).
Brent oil futures for January delivery decreased by 0.1 percent, settling at $72.23 per barrel, while West Texas Intermediate (WTI) crude futures also slipped by 0.1 percent, reaching $68.17 per barrel by 20:21 ET (01:21 GMT).
After a slight rebound on Wednesday, prices were still facing losses for the week, particularly following OPEC‘s decision to lower its demand forecast for the fourth straight month. Additionally, China’s fiscal measures, a key player in oil consumption, fell short of expectations.
On Wednesday morning, Brent futures had risen by 17 cents, or 0.24 percent, reaching $72.06 a barrel. Similarly, WTI crude futures increased by 14 cents, or 0.21 percent, closing at $68.26.
U.S. oil inventories and product stocks
According to data from the American Petroleum Institute (API), U.S. oil inventories decreased by approximately 777,000 barrels in the week ending November 8. This contrasted with predictions of a build of 1 million barrels and a prior week’s increase of 3.1 million barrels. However, gasoline inventories rose by 312,000 barrels, and distillate stocks grew by 1.1 million barrels. This uptick in product inventories raised concerns that U.S. fuel demand might be cooling, particularly as winter approaches.
Typically, API data foreshadows similar findings from official inventory reports, which are set to be released later on Thursday. The publication of this data was postponed by a day due to the U.S. holiday observed on Monday.
The decline in oil prices was also influenced by diminished fears of supply disruptions in the U.S., as tropical storm Rafael weakened without causing significant disruptions in the Gulf of Mexico.
Read more: Oil prices rise modestly but stay near two-week lows after OPEC’s demand growth downgrade
Political and economic considerations
Uncertainty regarding the implications of a potential second Donald Trump presidency has added pressure to oil markets. The president-elect has pledged to boost U.S. oil production and impose trade tariffs on China, the leading oil importer. Following Trump’s election victory last week, the dollar surged to a one-year high, further impacting crude prices.
Upcoming reports and demand outlook
Attention has shifted to the IEA’s forthcoming monthly report, which is expected later on Thursday. This report comes on the heels of OPEC’s recent reduction in its 2024 demand growth forecast for the fourth consecutive month, citing ongoing concerns about declining demand from China. The IEA has also been gradually lowering its demand outlook this year and takes a more pessimistic view on demand growth compared to OPEC.
China remains a focal point for oil markets, grappling with slowing economic growth and largely ineffective recent stimulus measures. The anticipated Trump presidency could exert additional economic pressure on the country.
Market sentiment and economic conditions
Despite a slight uptick in oil prices, persistent worries over declining demand forecasts and sluggish economic conditions in China continue to weigh heavily on market sentiment. In its latest monthly report released on Tuesday, OPEC revised its global oil demand growth estimate down to 1.82 million barrels per day (bpd) for 2024, a reduction from the previously expected 1.93 million bpd, primarily due to economic challenges in China.
On Tuesday, oil prices managed a marginal increase of 0.1 percent, recovering slightly after a decline of roughly 5 percent over the preceding two sessions. However, analysts cautioned that the market could still face potential repercussions from supply disruptions in Iran or rising tensions in the Middle East.
Last week, the Federal Reserve cut its policy interest rate by a quarter percentage point to a range of 4.50 to 4.75 percent. Generally, such rate reductions are intended to stimulate economic activity and could lead to heightened energy demand.
Delayed inventory reports and china’s fiscal measures
The release of U.S. weekly inventory reports was postponed by a day due to the Veterans Day holiday on Monday, with the API’s data scheduled for release at 4:30 p.m. EST (21:30 GMT) on Wednesday.
On Monday, crude prices experienced a sharp decline following China’s announcement of additional fiscal spending, which failed to meet investor expectations, compounded by disappointing inflation figures from the world’s largest oil consumer. In the U.S., concerns over supply disruptions eased as tropical storm Rafael weakened in the Gulf of Mexico, reducing fears of potential interruptions in production from the area.
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