Oil is expected to lose money each week as Chinese demand continues to perform poorly

Oil prices declined on Friday amid signs of underwhelming demand in China, the world's largest crude importer, as its economic recovery remains inconsistent.

Brent crude futures slipped by 65 cents, or 0.9%, reaching $71.91 per barrel at 0450 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures dropped 62 cents, or 0.9%, to $68.08 per barrel. For the week, Brent was poised for a 2.7% drop, while WTI was on track for a 3.3% decline.

"Although oil prices have largely held at around the $71.00 support level this week, the absence of a clear bullish driver indicates that any price recovery remains weak at present," noted Yeap Jun Rong, a market strategist at IG, in an emailed statement.

Concerns about increased supplies from the U.S. and OPEC+, combined with ongoing doubts regarding China's economic recovery, persist. Yeap also mentioned that the likelihood of a December rate cut by the Federal Reserve appears more uncertain, with a more balanced probability between a cut and no change due to the central bank's less dovish stance.

China's October crude processing by refiners dropped by 4.6% compared to a year ago, marking the seventh consecutive month of year-over-year declines, according to the National Bureau of Statistics. The decline was attributed to plant shutdowns and reduced operational rates among smaller independent refineries. The dip comes amid weaker factory output growth and lingering issues in China's property sector, despite some improvement in consumer spending, based on government data.

This week, oil prices were further pressured as major market forecasters pointed to bearish fundamentals.

The International Energy Agency (IEA) projected that global oil supply could surpass demand by 2025 even if OPEC+ production cuts remain. This prediction is due to rising production from the U.S. and other non-OPEC+ producers, which is expected to offset sluggish demand growth. The IEA raised its 2024 demand growth estimate by 60,000 barrels per day to 920,000 bpd, while maintaining its 2025 demand growth forecast at 990,000 bpd.

Meanwhile, OPEC revised its global oil demand growth forecasts for this year and 2025 downward, citing weakening demand in China, India, and other regions. This marked the fourth straight reduction in OPEC's 2024 demand outlook.

In the U.S., crude stockpiles rose by 2.1 million barrels last week, significantly exceeding analysts' expectations of a 750,000-barrel increase, according to the Energy Information Administration (EIA). Conversely, gasoline inventories fell by 4.4 million barrels, reaching their lowest level since November 2022, contrary to analysts' projections for a 600,000-barrel increase. Distillate stocks, including diesel and heating oil, also unexpectedly dropped by 1.4 million barrels, the EIA reported.

 

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.