By Priyanka Sachdeva, Market Analyst for Phillip Nova
Oil prices crumbled almost 11%, easing for straight five sessions as the Organization of the Petroleum Exporting Countries Plus (OPEC+) voluntary cuts failed to propel a rally in oil prices against the strength of the US Dollar. The sign of easing inflation is feeding into fears of a global economic slowdown and in turn dented demand for fuel globally.
Both benchmarks, the WTI and Brent dropped to 6 monthly lows, levels not seen in the second half of 2023 as the oil markets looked more inclined to the demand side narrative, completely discounting an over-supplied 2024. Fears of demand have exploded this week after a huge jump in US gasoline stocks, while the economic stability of China, the world’s largest importer of crude oil, is also doubtful after Moody’s downgraded its outlook. However, oil seems to have found some support on Thursday morning despite the rising US Dollar. As of 9:45 am Singapore Standard Time, WTI traded at $69.78 per barrel up by +0.58% while Brent rose +0.44% to $74.63 per barrel.
According to a recent survey, the OPEC pumped 27.81 million barrels per day last month, down by 90,000 barrels per day from October. Despite the “producer’s cartel” announcement of a 2.2-million-barrel output cut, oil traders are doubtful that OPEC+ producers will comply. Matching the broader market anticipation, Citi analysts also pointed to over-supplied oil markets in 2024, which would mean asset price deflation and lower commodity prices.
Meanwhile, the US dollar also touched a two-week high, which pressures demand by making oil more expensive for holders of other currencies. The official EAI data showed a larger-than-anticipated draw in US Crude oil inventories but it did little to support prices. The US Crude inventories fell by 4.6 million barrels, far exceeding the 1.4 million-barrel drop analysts had expected for the week ending December 1. Technically, oil prices took a steep hit and some stability can be in the cards after an 11% fall in a short span. Oil prices may continue to have a range-bound trading, biased on the downside and potential opportunities could be found in a “sell on rise” strategy.
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