Oil prices fell on Monday, as renewed concerns about weakening demand in the United States and China, coupled with mixed signals from the US Federal Reserve, kept markets in a state of uncertainty. Brent crude futures for January delivery fell eight cents to $81.35 a barrel, after losing $1 in previous trading, while US West Texas Intermediate crude futures for December delivery were at $77.11, down six cents.
Prices rose nearly 2% on Friday as Iraq expressed support for oil cuts by OPEC+, but lost about 4% during the week, recording a three-week losing streak for the first time since May.
The U.S. Energy Information Administration (EIA) said last week that US crude oil production this year will rise slightly less than previously expected while demand will fall.
It added that per capita gasoline consumption in the United States could fall next year to its lowest level in two decades.
Markets had been wary of a possible tightening of U.S. policy after Federal Reserve Chairman Jerome Powell said last week he could raise interest rates again if progress in curbing inflation stalls.
The Fed’s tougher talk “is not a welcome prospect given that recent data in China and the US has brought growth concerns back to the surface.”
OPEC+ will meet on Nov. 26 as Saudi Arabia and Russia say they will continue their further voluntary oil production cuts until the end of the year. Weak economic data released last week from China, the world’s largest crude importer, heightened fears of faltering demand, as refiners ordered less supply from Saudi Arabia, the world’s largest exporter, for December.
Oil prices fall as demand fluctuates and supplies increase
Brent crude futures for January delivery fell $0.71 to $80.72 a barrel, and West Texas Intermediate crude futures for December delivery fell to $76.49, down 68 cents.
Brent fell 0.87 percent and West Texas Intermediate fell 0.88 percent, as both benchmarks were well below the 100-day moving average of $86.61 per barrel for WTI and $82.31 per barrel for Brent.
Meanwhile, oil supplies from the Middle East – the source of about a third of the world’s crude oil – remained unaffected by Geopolitical tensions. Meanwhile, oil shipments from Russia and the United States are increasing.
The US Energy Information Administration (EIA) said last week that US crude oil production this year will rise slightly less than previously expected while demand will fall.
The Energy Information Administration said US per capita gasoline consumption could fall next year to its lowest level in two decades. Weak economic data released last week from China, the world’s biggest crude importer, also reinforced fears that demand was faltering.
China’s consumer prices fell to pandemic-era lows in October, casting doubt on the strength of the country’s economic recovery.
In addition, refiners in China ordered lower-than-expected supplies from Saudi Arabia for December, the world’s largest exporter.
Oil prices near 3-month lows as US dollar rises Investors pulled out of equity funds tracking Saudi stocks Meanwhile, OPEC+ will meet on November 26 to discuss supply and production policies, with major oil exporters Saudi Arabia and Russia confirming last week that they will continue their further voluntary oil cuts until the end of the year.
Positive outlook for oil supply and selling pressures weighing on oil prices
Raise forecast for non-OPEC supply growth in 2023 by 100,000 bpd to 1.8 million bpd. Keeps the outlook for non-OPEC supply growth for 2024 steady at 1.4 million bpd. OPEC’s crude oil output rose 80,000 bpd to 27.90 million bpd in October, led by Iran, Angola and Nigeria. Despite exaggerated negative sentiment regarding China’s oil demand performance, Chinese crude oil imports remain very good.
Global oil market fundamentals remain strong despite exaggerated negative sentiment. Despite favorable market fundamentals, oil prices have fallen in recent weeks, primarily due to financial speculators.
WTI came under renewed selling pressure after the aforementioned report, testing lows near $77.0, and US oil fell 0.08% during the day.
In October, consumer prices in China fell to pandemic-era lows, raising concerns about the country’s economic recovery.
However, if WTI approaches $75 per barrel, “we are likely to see buying support amid expectations that Saudi Arabia and Russia will decide to continue their voluntary supply cuts beyond December.”
Saudi Arabia and Russia, the top oil exporters, confirmed last week they would continue their further voluntary cuts in oil output until the end of the year as concerns about demand and economic growth continue to weigh on crude markets. OPEC+, the Organization of the Petroleum Exporting Countries and its allies including Russia, will meet on Nov. 26.
In October, consumer prices in China fell to pandemic-era lows, raising concerns about the country’s economic recovery.
Fitch forecasts the impact of higher oil prices in the coming years
Fitch Ratings says higher-than-expected oil prices in a scenario where conflict in the Middle East disrupts oil supplies would cause lower economic growth and higher inflation. .
Global GDP growth will decline by 0.4 percentage points in 2024, but will only decline by 0.1 points in 2025, although the lack of a significant recovery suggests that there may be a sustained moderate impact beyond the initial shock.
The impact of negative growth in 2024 compared to the September Global Environment Outlook forecast ranges from 0.1 percentage point in Indonesia to 0.9 percentage points in Korea. The US, the eurozone and Japan are seeing 0.5 percentage point impacts.
Fitch’s September World Economic Outlook assumes oil prices of US$75 per barrel and US$70 per barrel in 2024 and 2025 respectively. Using simulations from Oxford Economics’ global economic model, I estimated the impact of higher oil prices throughout 2024-2025 on our baseline growth and inflation forecasts in Jiu’s forecast.
Fitch’s scenario assumes that due to supply constraints, oil prices will average US$120 per barrel in 2024 and US$100 per barrel in 2025. That would
Higher oil prices will weaken GDP growth in almost all Fitch 20 economies, although the impact will largely dissipate in 2025. 2025. The absence of a significant recovery in growth in 2025 means a long-term, albeit generally moderate, impact on GDP levels in most countries, which could affect assessments of potential growth.
The impact of negative growth in 2024 compared to the September Global Environment Outlook forecast ranges from 0.1 percentage point in Indonesia to 0.9 percentage points in Korea. The US, the eurozone and Japan are seeing 0.5 percentage point impacts.
