Oil prices struggle to pick up after hitting 3-month low
What's the story
Oil prices tumbled on Wednesday, slipping to a three-month low. These declines were due to worries about lowered demand in major oil-consuming nations, such as the United States and China.
Brent crude futures traded near $81.65 a barrel, while US crude futures slipped to $77.24.
"The market is clearly less concerned about the potential for Middle Eastern supply disruptions and is instead focused on an easing in the balance," stated Warren Patterson and Ewa Manthey, ING bank analysts.
Details
Large build in US crude stockpiles
Last week, US crude oil inventories increased by nearly 12 million barrels.
The US Energy Information Administration (EIA) will delay the release of weekly inventory data until next week.
The EIA announced on Tuesday that US crude oil production this year will increase less than previously anticipated, while demand will decrease.
The agency now predicts total petroleum consumption in the country to drop by 300,000 barrels per day (bpd) this year, reversing its earlier forecast of a 100,000 bpd increase.
What Next?
OPEC export estimates remain high
Goldman Sachs analysts estimated that seaborne net oil exports by six OPEC countries, which announced cumulative production cuts of two million bpd since April 2023, remain only 0.6 million bpd below April levels.
"OPEC crude exports are up by about one million bpd since their August low, as a result of seasonally lower domestic demand in the Middle East," noted UBS analyst Giovanni Staunovo.
Insights
China's exports extend declines
Recent data from China, the world's largest crude oil importer, cast doubt on the demand outlook.
Crude oil imports by the world's second-largest economy in October demonstrated strong growth, but its total exports of goods and services shrank at a faster rate than anticipated, fueling concerns about reduced global energy demand.
The data signals the continued decline in the Chinese economic outlook driven by deteriorating demand in the country's largest export destination, the west.
Facts
OPEC expects global economy growth despite challenges
Despite economic hurdles, such as high inflation and interest rates, OPEC anticipates that the global economy will grow and boost fuel demand.
"Traders will remain on high alert for signs of a wider conflict emerging in the region that could disrupt supplies, but it seems those fears are subsiding," commented OANDA analyst Craig Erlam.
A rebound in oil exports from OPEC countries also contributed to the pressure on oil prices, with Brent futures dropping to $81.58 by 10:20am IST.