New York: Oil prices experienced a dip in early trading on Thursday, undoing much of the previous session’s gains. Prices were pressured by concerns over rising global oil production amid slow demand growth, with a stronger dollar further compounding the declines.
Brent crude futures fell by 35 cents, or 0.5%, to $71.93 per barrel by 0400 GMT, while U.S. West Texas Intermediate (WTI) crude dropped by 42 cents, or 0.6%, to $68.01.
“Oil is grappling with the earlier weakened demand forecast narrative by OPEC, which postponed the rollback of additional production for another month due to fears of adversely affecting prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova, in an email.
Earlier this week, the Organization of the Petroleum Exporting Countries (OPEC) lowered its global oil demand growth forecast for 2024 to 1.82 million barrels per day (bpd), down from the previous forecast of 1.93 million bpd, citing weak demand from China, India, and other regions. This adjustment sent oil prices to their lowest level in nearly two weeks.
The U.S. Energy Information Administration (EIA) also raised its forecast for U.S. oil output to an average of 13.23 million bpd this year, marking an increase of 300,000 bpd from last year’s record of 12.93 million bpd and up slightly from the previous forecast of 13.22 million bpd.
The EIA also revised its global oil output forecast for 2024 to 102.6 million bpd, from 102.5 million bpd previously. For 2025, the forecasted global output is now 104.7 million bpd, up from 104.5 million bpd.
The EIA’s oil demand growth forecasts, however, are more cautious than OPEC’s, predicting demand growth of approximately 1 million bpd in 2024, an increase from the earlier estimate of 900,000 bpd.
Market participants are awaiting the International Energy Agency’s (IEA) oil market report later in the day, as well as the EIA’s U.S. crude oil and product stockpile data, which are expected to provide further trading signals.
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China’s demand concerns remain a significant factor contributing to the weakening of oil prices, according to analysts.
“Despite various stimulus measures implemented by Chinese authorities, there has been little to no improvement in economic activity or sentiment within mainland China,” said Sachdeva. She noted that China continues to be the “sore joint” for oil demand, with its sluggish recovery raising concerns about an oversupply in the market as soon as 2025.
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Additionally, the strengthening U.S. dollar, which reached a near seven-month high against major currencies on Wednesday following U.S. inflation data for October in line with expectations, added further pressure to oil prices. A stronger dollar tends to make commodities priced in dollars more expensive for buyers using other currencies.
“The stronger USD is creating strong headwinds for commodities,” ANZ Research said in a note.
