Oil prices dipped on Tuesday as the leading U.S. diplomat intensified efforts to advocate for a ceasefire in the Middle East. Additionally, slowing demand growth in China, the largest oil importer in the world, continued to exert pressure on the market.
Brent crude futures for December delivery fell by 19 cents, or 0.3 percent, settling at $74.10 a barrel by 03:50 GMT. Meanwhile, U.S. West Texas Intermediate crude futures for November delivery decreased by 18 cents to $70.43 a barrel on its final trading day as the front month.
The more actively traded West Texas Intermediate futures for December, soon to take over as the front month, slipped by 14 cents, or 0.2 percent, to $69.90 per barrel.
Both Brent and West Texas Intermediate had increased nearly 2 percent on Monday, recovering some of the more than 7 percent decline seen the previous week. The ongoing conflict in the Middle East could disrupt oil supplies, leaving the market on edge.
By 5:22 GMT, Brent crude futures had climbed by 0.53 percent to $73.45 per barrel, while U.S. West Texas Intermediate crude rose by 0.66 percent to $69.68 a barrel. Last week, Brent experienced a decline of more than 7 percent, and U.S. West Texas Intermediate crude dropped approximately 8 percent, marking the largest weekly decrease since September 2.
China’s economic measures
On Monday, China announced a reduction in benchmark lending rates, as expected, following earlier cuts to other policy rates last month. This move is part of a broader stimulus strategy aimed at revitalizing the economy.
This decision followed Friday’s data revealing that China’s economy expanded at its slowest rate since early 2023 in the third quarter, raising alarm about oil demand.
Read more: Oil prices recover marginally following 7 percent weekly drop on rising Mideast tensions
Future demand outlook
Despite recent stimulus efforts by Beijing, the International Energy Agency’s head indicated that China’s oil demand growth is likely to remain weak in 2025, as the world’s second-largest economy shifts to electric vehicles and experiences slower growth.
IEA Head Fatih Birol warned on Monday that weakness in top importer China will continue to weigh on global oil demand in the coming years.
Birol’s comments- made in an interview with Bloomberg- came after the IEA last month cut its demand growth forecast on concerns over China. The Organization of Petroleum Exporting Countries had also trimmed its global oil demand forecast last week.
China is the world’s biggest oil importer, and has been grappling with a prolonged downturn in economic growth, which is expected to quash the country’s appetite for crude.
Increased electric vehicle adoption in the country is also expected to dampen fuel demand.
Nevertheless, Saudi Aramco remains “fairly bullish” on China’s oil demand, particularly in light of the government’s stimulus measures designed to spur growth, as stated by the company’s leader on Monday.
A stronger dollar typically puts downward pressure on oil prices, as it makes oil, priced in dollars, more expensive for buyers using other currencies.
Preliminary data from a Reuters poll indicated that U.S. crude oil inventories likely increased last week, while stocks of distillates and gasoline were projected to decline.
Supply adjustments
Oil prices fell last week due to slowing economic growth in China and diminishing risk premiums in the Middle East. U.S. President Joe Biden remarked on Friday that there was a chance to address the situation between Israel and Iran in a way that temporarily halts the conflict.
However, tensions in the Middle East escalated over the weekend, reigniting concerns about the stability of the crude supply chain.
On the supply side, U.S. energy companies reduced the number of active oil and natural gas rigs for the fourth time in five weeks last week, according to a report by Baker Hughes. Additionally, China’s refinery output dropped for the sixth consecutive month, as tighter refining margins and weak fuel consumption limited processing capacity.
Record U.S. production
Last week, the Energy Information Administration reported that U.S. crude production reached a record high, increasing by 100,000 barrels per day during the week of October 11 to 13, totaling 13.5 million barrels per day. Two months earlier, production had peaked at 13.4 million barrels per day. The EIA also noted that U.S. crude oil, gasoline, and distillate inventories declined last week.
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