Global oil prices have been on a downward trend recently, with Brent dipping below $85 per barrel and West Texas Intermediate hovering around $80. This decline comes amidst uncertainties surrounding the Federal Reserve’s tightening policies and inconsistent demand from major importers like China and Europe. The price drop marks the first time in over two months that oil prices have plunged below $80 a barrel.
On Tuesday, oil prices declined moderately, with WTI falling to $80.41/bbl (-0.5%), and Brent to $84.69 (-0.6%). This was due in part to a strengthening USD, demand concerns, and a pullback in risk sentiment. Neel Kashkari, a member of this year’s Federal Open Market Committee (FOMC), hinted at potential further Fed tightening due to unresolved inflation control issues.
Despite these developments, Saudi Arabia and Russia, OPEC+ heavyweights, have extended their daily supply cuts exceeding 1 million barrels through the end of the year. The market currently discounts disruption risks from geopolitical issues, such as heightened tensions between Israel and Hamas.
However, global consumption worries continue to drive oil prices lower. Europe’s stagnant economic growth has resulted in a drop in demand for diesel and naphtha. In China, state-owned oil refiners might be forced to lower operating rates due to declining margins.
In terms of imports, China’s year-to-date crude imports rose 14.4% in September, recovering by 7% in October after a 13% drop. Product exports and imports surged by 33.2% and 93.6% respectively.
Upcoming data from the American Petroleum Institute (API) and the US Energy Information Administration are expected to provide more insight into global oil demand trends. The API will release crude and product inventory data today, along with September’s US trade balance and German IP data. Additionally, Fed members and European Central Bank’s de Guindos, Enria, and McCaul are scheduled to speak.
