Sunday February 25, 2024

Oil prices hit 4-month low on concerns about US, Chinese economy

By News Desk
November 17, 2023
Active pump jacks increase pressure to draw oil toward the surface at the South Belridge Oil Field on February 26, 2022, — AFP
Active pump jacks increase pressure to draw oil toward the surface at the South Belridge Oil Field on February 26, 2022, — AFP

NEW YORK: Oil prices fell more than $3 a barrel on Thursday, extending losses from the previous session, as investors in New York responded to signals of higher supply in the United States and expectations of weak energy demand in China.

Brent futures fell $2.60, or 3.2 percent, to $78.58 a barrel by 1526 GMT. US West Texas Intermediate crude (WTI) shed $2.65, roughly 3.5 percent, to $74.01. Both benchmarks dropped by more than 1.5 percent in the previous session.

WTI's front-month contract also traded below the price for the second month, a structure known as contango. "Clearly, the decline in crude oil prices and the weakening of the structure is an ominous sign; one that implies an oversupplied physical market," said Tamas Varga of oil broker PVM.

"Whether a drop of this magnitude is fundamentally justified remains a question, but the financial firepower of New York tends to exaggerate sentiment," he told Reuters. The U.S. government Energy Information Administration said U.S. crude stocks rose by 3.6 million barrels last week to 421.9 million barrels, far exceeding analysts' expectations in a Reuters poll.

U.S. crude production held steady at a record 13.2 million barrels per day (bpd). The weekly government data, which was not published last week due to systems upgrade, also showed U.S. crude production was holding at a record 13.2 million barrels per day that it hit in October.

"U.S. supply activity is headwind for the market, and U.S. is a problem for OPEC+," said John Kilduff, partner at Again Capital LLC in New York, adding he does not think Saudi Arabia can cut more output to boost prices. Top oil exporters Saudi Arabia and Russia, part of OPEC+, the Organization of the Petroleum Exporting Countries and allies, said this month they would continue with their additional voluntary oil output cuts until year end.

U.S. gasoline stocks showed strong demand with a surprise draw of 1.5 million barrels last week. Diesel inventories fell more than expected at 1.4 million barrels. The International Energy Agency on Tuesday joined OPEC in raising oil demand growth forecasts for this year, despite projections of slower economic growth in many major countries.

China's oil refinery throughput eased in October from the previous month's highs as industrial fuel demand weakened and refining margins narrowed. Still, its economic activity perked up in October as industrial output increased at a faster pace and retail sales growth beat expectations. Japan's economy contracted in July-September, snapping two straight quarters of expansion on soft consumption and exports. U.S. retail sales fell in October for the first time in seven months.

European Union diplomats said Russian oil tankers are not targeted in the European Commission's proposal for tightening implementation of a price cap on the country's crude oil. Earlier, the Financial Times reported that Denmark will be tasked with inspecting and potentially blocking Russian tankers sailing through its waters under new EU plans as a way of enforcing a $60 per barrel price cap on Moscow's crude.