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Oil prices fell in Asian trading on Friday, heading for sharp losses for a third straight week as crude markets were weighed down by lingering concerns about slowing demand and renewed fears of higher U.S. interest rates. Crude oil prices have seen a series of sharp losses this week, following a series of disappointing economic readings from China, the largest importer, as well as from the eurozone. Tough signals from Federal Reserve officials have also weighed on, especially as the dollar rebounds amid renewed expectations that U.S. interest rates will remain high for longer. Federal Reserve Chairman Jerome Powell echoed these forecasts when he spoke on Thursday, and also warned that interest rates have more room to rise. Signs of global economic weakness, coupled with the prospect of a U.S. interest rate hike, have raised concerns about how strong oil demand will be in the coming months. This was also accompanied by data showing a massive weekly jump in US crude inventories, as domestic production rises. Brent crude futures fell 0.1% to $79.85 a barrel, while West Texas Intermediate crude futures fell 0.3% to $75.53 a barrel. Oil is heading for a third week in the red, prices are approaching 4-month lows Brent and WTI futures are trading near their weakest levels since late July, and are set to lose between 5.8% and 6.3% this week, the third consecutive week of losses. Crude oil markets have been experiencing a sell-off as fears of war have eased causing traders to price a lower risk premium than the conflict, which does not appear to disrupt oil supplies from the Middle East.

Economic pressures and increased production: effects on oil prices and prospects for fuel decline

Adding to the pressure, weak economic signals from China are the latest data, with recent data showing the country returned to anti-inflation zone in October, with business activity contracting and exports continuing to decline. Signs of increased U.S. and Iranian crude production also suggest that oil markets may not be as tight as initially expected, even as major producers Russia and Saudi Arabia signaled they will maintain supply cuts until the end of the year. Saudi Energy Minister Prince Abdulaziz bin Salman said on Thursday that demand for oil is not weakening, and that speculators have been behind the recent decline in commodity prices. The dollar’s recovery also weighed on crude oil markets, especially with Federal Reserve Chairman Jerome Powell warning that interest rates could continue to rise as the central bank moves against inflation. The dollar rebounded sharply from six-week lows this week, given that Powell’s comments were preceded by similar hawkish signals from a series of other Fed officials. This has led markets to reassess their expectations that the Fed has finished raising interest rates, and has stimulated bets that interest rates will remain high for longer. An Energy Department official said on Friday that fuel prices are expected to fall again in the second week of November.. Diesel prices may fall by about 2.50 pesos per liter, while kerosene prices may fall by about 1.50 pesos per liter. Meanwhile, gasoline prices may fall by 0.50 pesos per liter.. Prices are falling because global supply constraints appear to be declining. If this continues, it will be the third weekly decline in diesel and kerosene prices.

Falling Oil Prices: Demand Fears and War Threats Cast a Shadow

Oil is heading for a third consecutive weekly decline due to growing demand concerns and a falling war risk premium, with Saudi Arabia blaming speculators for the decline. Global benchmark Brent crude settled near $80 a barrel on Friday and fell about 6% this week, while WTI approached $76. Prices rose on Thursday after Saudi Energy Minister Prince Abdulaziz bin Salman’s comments were similar to his criticism of speculators in May, weeks before the kingdom cut production. Brent crude has fallen more than 13% over the past three weeks on bearish demand signals from China, the United States and Europe, while flows from the Middle East remained unaffected by the war between Israel and Hamas. Hedge fund manager Pierre Andorand also pointed to larger-than-expected supplies — citing rising production in the U.S. and Iran — as a catalyst for the recent decline. It’s a sharp reversal from late September, when Brent approached $100 a barrel and the Organization of the Petroleum Exporting Countries predicted an unprecedented drop in inventories amid record fuel demand and Saudi cuts. Attention has now shifted to a slowdown in China’s refining sector and stubbornly high interest rates in the US. Diesel, the main fuel fueling the economy, has become the latest drag on oil, with U.S. futures falling about 8% this week. This reflects the decline in Europe, where lower industrial and economic activity in Germany, France and Spain led to a sharp decline in fuel consumption. The rapid deterioration in sentiment has caused the spread of WTI to turn into a bearish structure, with near-term prices below longer prices, for the first time since July. The shift comes as U.S. production soars to a record high and inventories at the country’s largest storage hub fall to very low levels.

The impact of oil cycles on the economy and financial markets

Boom cycles in global crude oil markets have many implications for financial markets, the general economy, and local and global geopolitics. In financial markets, cyclical oil and gas prices affect not only the profitability of energy companies, but also the wealth of investors who hold holdings in energy stocks.. For example, higher crude oil prices often translate into greater returns for investors who benefit from larger dividends, faster share buybacks, and higher share prices. This explains why investors have been bullish about energy stocks in recent years, especially major and stable oil companies such as Shell and BP in Europe, and ExxonMobil and Chevron in the US.. Like most of their industry peers, the four companies enjoyed extraordinary profits in 2022 thanks to higher oil and gas prices. Despite moderate earnings with moderate oil prices in the first three quarters of 2023, these four companies continued to record strong financial performance. This is because despite the decline in overall inflation and oil prices in the past few quarters, oil prices remain high compared to historical levels. Although crude oil prices are still higher than before February 2022, the period of Russia’s invasion of Ukraine, the prospect of major oil companies maintaining strong performance and delivering strong shareholder returns in 2024 is reasonable. Moreover, some analysts believe that crude oil prices may rise again in 2024 amid supply cuts by major producers such as Saudi Arabia. Last September, commodity strategists at Goldman Sachs expected Brent crude, the international index, to reach $100 a barrel in 2024 due to demand for crude oil that outstrips supply. JPMorgan strategists at the time also discussed a scenario in which the price could jump to $120 a barrel as cuts by major producers continue.