Rally reversed as oil slips on jitters over waning demand in US and China

Beijing — Oil prices backed off on Monday, reversing its Friday rally, as renewed concerns over waning demand in the US and China dented market sentiment.

Brent crude futures for January were down 71c, or 0.87%, at $80.72 a barrel at 4am GMT (6am), while the US West Texas Intermediate (WTI) crude futures for December were at $76.49, down 68c, or 0.88%.

Both benchmarks were well below the 100-day moving average of $86.61 a barrel for WTI and $82.31 a barrel for Brent.

Prices gained nearly 2% last Friday as Iraq voiced support for oil cuts by Opec+, but lost about 4% for the week, notching their third weekly losses for the first time since May.

“Investors are more focused on slow demand in the US and China while worries over the potential supply disruptions from the Israel-Hamas conflict have somewhat receded,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

The US Energy Information Administration (EIA) said last week crude oil production in the US this year will rise by slightly less than previously expected while demand will fall.

Next year, per capita US petrol consumption could fall to the lowest level in two decades, it said.

Weak economic data last week from China, the world’s biggest crude oil importer, also increased fears of faltering demand.

China’s consumer prices fell to pandemic-era lows in October, casting doubts on the strength of the country’s economic recovery.

Additionally, refiners in China asked for less supply from Saudi Arabia, the world’s largest exporter, for December.

Still, Kikukawa said oil prices would be supported if WTI approaches $75 a barrel.

“If the market falls further, we will likely see support buying on expectations that Saudi Arabia and Russia would decide to continue their voluntary supply cuts after December,” Kikukawa said.

Top oil exporters Saudi Arabia and Russia confirmed last week they would continue with their additional voluntary oil output cuts until the end of the year as concerns over demand and economic growth continue to drag on crude markets.

Opec+ will meet on November 26.

On the supply side, US energy firms cut the number of oil rigs operating for a second consecutive week to their lowest since January 2022, energy services firm Baker Hughes said. The rig count points to future output.

Reuters