Oil prices fall below $80 amid US Fed rate concerns
For the first time in over two months, oil prices have dipped under $80 a barrel. This comes as concerns about the US Federal Reserve's rate hikes taking a pause, outweighed supply reductions by OPEC+ leaders Saudi Arabia and Russia. West Texas Intermediate (a major global oil benchmark) experienced a drop of up to 2.2%, while broader financial markets saw declines, and the US Dollar gained strength.
Supply cuts and geopolitical risks disregarded
Even with supply cutbacks by OPEC+ leaders Saudi Arabia and Russia, who recently confirmed their commitment to maintaining these restrictions until year-end, oil prices persist in their downward trend. The ongoing conflict between Israel and Hamas has also been unable to stop the falling prices. As told to Reuters, Daniel Hynes, a commodity strategist at ANZ Group Holdings Ltd remarked, "The market is completely discounting any risk of disruption coming from elevated geopolitical risks."
Weak economic growth and falling margins impact demand
Slow economic growth in Europe has adversely affected manufacturing, resulting in decreased demand for diesel and naphtha, according to Wood Mackenzie Ltd. In China, state-owned oil refiners might need to reduce operating rates due to shrinking margins, according to industry consultant OilChem. These elements contribute to the overall drop in oil prices, fueled by concerns surrounding global consumption.
Chinese crude imports rise, US data awaited
In October, Chinese crude imports rose by 7% compared to the previous month when they had fallen by 13%. Upcoming data from the US Energy Information Administration (EIA) and the industry-funded American Petroleum Institute (API) is anticipated to shed more light on oil demand. The EIA is set to release its monthly energy outlook, while the API will reveal inventory estimates, potentially providing additional details on the current state of the oil market.
