Oil prices face 7th consecutive weekly decline: Here's why
Oil prices are bouncing back after a seven-week slump, thanks to Saudi Arabia and Russia encouraging more OPEC+ members to reduce output. This comes amid concerns about an oversupply of oil and weak demand from China. Brent crude futures climbed 2.6% to $75.98 a barrel, while US West Texas Intermediate crude futures rose by 2.6% to $71.16 a barrel.
Factors behind the decline
Tamas Varga of oil broker PVM pointed out that factors such as OPEC+'s weakening position, record US production, and slow Chinese crude oil imports suggest an oil surplus. In November, China's crude oil imports dropped 9% from the previous year. This was due to weak economic indicators, high inventory levels, and reduced orders from independent refiners.
OPEC+ output cuts agreement
OPEC+ agreed to cut output by a combined 2.2 million barrels per day (bpd) for Q1 2024. However, Viktor Katona, Lead Crude Analyst at Kpler, predicts that total production from OPEC+ countries will only decrease by 350,000 bpd from December 2023 to January 2024. Some OPEC+ countries may not stick to their commitments because of unclear quota baselines and reliance on hydrocarbon revenues.
US crude output and market watch
In the United States, oil production remains near record highs of over 13 million bpd, according to data from the US Energy Information Administration. The market is also anticipating the official US monthly job report, which is expected to reveal improved job growth in November and moderately rising wages. This could strengthen the belief that the US Federal Reserve has finished raising interest rates for this cycle.
