Oil prices decline as demand worries outweigh supply forecasts – Oil prices declined on Thursday as concerns about reduced demand during the winter season and economic uncertainty in China were more significant than expectations of reduced supplies from extended production cuts in Saudi Arabia and Russia.
This morning’s 32-cent decline in Brent crude futures to $90.28 per barrel marked the end of a nine-session winning streak. Similarly, U.S. West Texas Intermediate crude (WTI) futures dropped 33 cents to $87.21 per barrel.
When Saudi Arabia and Russia, the world’s leading oil exporters, decided to extend their voluntary supply reductions until the end of the year, both benchmarks increased earlier in the week.
These extensions are in addition to the April cutbacks made by a number of OPEC+ members, which are scheduled to continue until the end of 2024.
CMC Markets’ Shanghai-based analyst Leon Li stated to Reuters, “At this time, it is extremely difficult for us to identify any negative factors due to supply constraints. However, we must consider potential demand risks, such as the possibility that in the fourth quarter, after summer demand subsides, the market could enter an off-peak season for oil consumption.”
In August, China’s data showed a varied picture, with exports falling 8.8 percent compared to the previous year and imports falling 7.3 percent. However, petroleum imports increased by 30.9% annually, which had an effect on prices.
Li, an expert, noted that the weakness in China’s data seems to be stabilising, as trade data showed slower declines than what market surveys had predicted.
In addition, the Chinese government has implemented a number of initiatives to stimulate the financial and real estate markets.
However, Li stressed that it is too soon to determine the tempo of China’s demand recovery. Nonetheless, he was optimistic that August would be better than July.
There are concerns that the increased oil production from Iran and Venezuela could partially counteract the reductions made by Saudi Arabia and Russia and dampen market enthusiasm.
