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Oil prices faced continued downward pressure as they slumped to their lowest point in over three months. The decline persisted on Wednesday, with worries about diminishing demand in both the United States and China exacerbating the situation.
Concerns Over Waning Demand
Brent crude futures saw an 8-cent dip, settling at $81.53 per barrel by 0914 GMT. While U.S. crude dropped 20 cents to $77.17. Both benchmarks had reached their lowest levels since July 24 during the previous trading session.
Oil Prices Fall Market Focus Shifts
Analysts from ING, Warren Patterson, and Ewa Manthey, noted that the market’s primary concern had shifted. It’s now less preoccupied with potential Middle Eastern supply disruptions. And is instead concentrating on a potential easing in the balance, referring to the tight conditions in the crude supply.
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Shift in U.S. Production and Consumption
The U.S. Energy Information Administration (EIA) reported that crude oil production in the United States for this year would rise slightly less than previously anticipated. However, demand is expected to decrease. The EIA reversed its earlier forecast of a 100,000 bpd increase in total U.S. petroleum consumption. Thus, now expecting a fall of 300,000 barrels per day.
Increasing Crude Stocks
Late on Tuesday, market sources cited American Petroleum Institute figures, indicating that U.S. crude oil stocks had increased by nearly 12 million barrels last week.
Global Economic Concerns
Data from China, the world’s largest crude oil importer, showed a more rapid contraction in total exports of goods and services than expected. This reflects the challenges faced by the domestic and global economy, which are adversely affecting the oil balance, as stated by Tamas Varga, an oil broker at PVM.
China’s Robust Crude Imports
Despite these concerns, China’s October crude Oil Prices Fall imports showed substantial growth. Additionally, the central bank governor in China announced that the world’s second-largest economy is expected to meet its gross domestic product growth target this year.
Supply and Demand Outlook
In more optimistic news for crude prices, Goldman Sachs analysts estimated that seaborne net oil exports from six countries within OPEC would remain only 0.6 million bpd below April levels. Since April 2023, OPEC has announced cumulative production cuts amounting to 2 million bpd.
Positive Economic Growth Expectations
OPEC remains hopeful, expecting the global economy to grow and fuel demand to continue, despite economic challenges such as high inflation and interest rates.
