Crude Oil Prices Slide Amid China’s Economic Concerns
Friday’s trading showed January WTI crude oil (CLF25) ending down -0.72 (-1.05%), with January RBOB gasoline (RBF25) dropping -0.0296 (-1.53%).
Early Gains Fade as Market Reacts to Economic Signals
Crude oil and gasoline prices gave up their early gains throughout Friday, resulting in crude hitting a 1-1/2 week low and gasoline dropping to a 2-month low. Concerns regarding a slowdown in China’s economy are dampening expectations for crude demand.
The Dollar Index and OPEC+ Meetings Influence Prices
Initially, prices for crude moved higher as the dollar index (DXY00) fell to a 2-1/2 week low. This, paired with expectations that OPEC+ will delay planned production increases at their meeting next week, provided support for crude prices. Furthermore, the S&P 500 reached a new record high on Friday, reflecting a positive outlook for energy demand.
China’s Oil Demand Decline Raises Concerns
However, China’s declining crude demand is a significant bearish factor. Bloomberg reported that China’s apparent oil demand in October fell by -5.4% year-on-year to 14.07 million barrels per day (bpd). Additionally, from January to October, demand dropped by -4.03% year-on-year to 14.00 million bpd, marking China as the world’s second-largest consumer of crude oil.
OPEC+ Production Decisions and Market Dynamics
Crude prices have some support from expectations that OPEC+ will postpone the anticipated increase in oil supply of +180,000 bpd from January to the second quarter of 2025. This decision will be addressed during the group’s online meeting scheduled for December 5. Previously, they agreed to restore 2.2 million bpd of output in monthly increments by late 2025. The UAE is also set to gradually increase its output by 300,000 bpd due to recent enhancements in its production capacity.
Rising Crude Oil Stored on Tankers
Bearish sentiment is reinforced by an uptick in global crude oil held on tankers, which saw a 34% weekly increase, reaching 74.83 million barrels as reported by Vortexa for the week ending November 22.
Geopolitical Tensions Impacting the Market
The ongoing Ukraine-Russia conflict continues to provide some support for crude prices. Recent missile launches by Russia into Ukraine, alongside threats to strike critical centers in Kyiv, contribute to an unpredictable market atmosphere. Additionally, Russian President Putin has updated Russia’s nuclear doctrine, expanding the parameters for using atomic weapons.
Increase in Russian Exports Complicates Supply Dynamics
Conversely, Russia’s rising crude exports present a bearish outlook for oil prices. Data from Bloomberg indicates that Russian crude exports increased by +100,000 bpd to 2.93 million bpd for the week ending November 24. Furthermore, Russia’s Energy Ministry reported a production figure of 8.97 million bpd in September, slightly below their OPEC+ target.
US Inventory Reports and Rig Counts
As per Wednesday’s EIA report, US crude oil inventories were -4.5% lower than the average for this time of year as of November 22. Gasoline inventories dipped -3.5%, while distillate inventories fell -5.1%. During the same week, US crude oil production rose by +2.2% to 13.49 million bpd, just shy of the record 13.50 million bpd recorded earlier in the month.
According to Baker Hughes, the number of active US oil rigs decreased by two to 477 rigs, matching a 2-3/4 year low. This figure has significantly declined from a high of 627 rigs noted in December 2022.
On the date of publication,
Rich Asplund
did not hold (directly or indirectly) any positions in the securities mentioned in this article. All data is intended for informational purposes. For full disclosure, please refer to the Barchart Disclosure Policy
here.
The views presented are the author’s opinions and do not reflect those of Nasdaq, Inc.
