By Nicholas Earl
Oil prices have shown signs of recovery in today’s session, after dipping below $80 per barrel last night, with markets weighed down by easing demand and investors cashing in on a waning war-risk premium.
Brent Crude is up 1.65 per cent in afternoon trading, priced at $81.19 per barrel, while WTI Crude has risen 1.59 per cent at $76.92 per barrel over the same time period.
This follows both benchmarks dropping to their lowest levels since mid-July yesterday, bogged down by concerns over easing demand in China and the US – the world’s two largest consumers.
Prices remain underpinned by tight supplies and hopes major central banks are finally done with rate hikes.
However, Brent is nearly $20 per barrel lower than its September peak, when swingeing cuts from its OPEC and its allies including Russia (OPEC+) triggered a huge rally.
Overall, its output cuts represent five per cent of global markets and more than five million barrels per day.
However, the rally has since collapsed over lowered demand expectations, with customs data revealing that China’s total exports of goods and services contracted faster than expected.
This has been followed up with fresh data today showing consumer prices in China and a sluggish economic revival following the pandemic.
Looking Stateside, crude oil inventories have increased 11.9m barrels over the week to 3 November – based on Reuters reports of American Petroleum Institute figures. If correct, this would represent the biggest weekly build since February.
Callum Macpherson, head of commodities at Investec, believed it has been a “dramatic” couple of days in oil markets.
“A number of technical levels have been broken, leading to Brent touching a low of 79.20 per barrel yesterday, the lowest it has traded at since July – just after the Saudi Additional Voluntary cut came into effect,” he said.
The commodities expert also pointed to the US Energy Information Administration’s forecast that US gasoline demand would be lower in 2024 than in 2023, which he suggested was “emblematic of the challenge facing oil demand.”
He said: “Perhaps even more profoundly, the report said this would lead to the lowest per-capita demand in 20 years. This was put down to ‘an increase in remote work[ing], improvements in the fuel efficiency of the U.S. vehicle fleet, high gasoline prices, and persistently high inflation.’ This adds to worries of weakening demand in Europe and Asia.”
Looking ahead, there remains the prospect of supply disruption if the conflict in Israel escalates further.
OPEC and the International Energy Agency also set to publish their latest monthly updates next week, which will provide further indications for global markets.
