On early Friday, oil prices retreated amid growing doubt that China could jumpstart its economy and meet its ambitious 5.00% fourth-quarter growth target.
West Texas Intermediate (WTI) December crude futures plunged by 1.44% to $67.71 per barrel on the morning of November 15. Analysts expect the downward pressure to continue, resulting in a 0.96% decline to $67.07 on the following trading day.
Likewise, Brent oil futures for December delivery slumped by 1.66% to $71.50 a barrel, snapping a three-day winning streak. Nevertheless, industry watchers predict prices dropping by 0.92% to $70.84 on Monday.
Oil refineries in China processed 4.60% less petroleum in October, marking seven consecutive year-over-year (YoY) declines. Regulators noted an increase in the number of independent plants suspending or reducing operations amid waning industrial demand.
In addition, the International Energy Agency (EIA) forecasted that oil production will exceed demand by over 1.00 million barrels per day in 2025. Furthermore, this estimate does not even include OPEC+’s planned gradual unwinding of its output cuts starting next month.
Lastly, black gold also suffered additional headwinds after the EIA reported a steeper-than-projected increase in crude stockpiles. In the week ending November 08, inventories added 2.09 million barrels, over five times the market consensus of 400,000 barrels.
China Factory Yield Falls, Threatening Oil Demand
Despite deploying a $1.60 trillion five-year debt package, China failed to inspire confidence in oil market participants. According to UBP, Beijing needs at least $2.00 trillion more in fiscal stimulus to reach its 5.00% annualized Q4 GDP growth target.
Moreover, Chinese industrial production growth eased to 5.30% YoY last month, decelerating from the 5.40% advance in September. This figure reversed the analysts’ estimated acceleration to a 5.50% expansion.
China’s property sector crisis also showed no signs of abating, as housing prices shrank by 5.90% YoY, continuing the contraction that began in July 2023. This reading was deeper than the 5.80% tightening in September, dampening oil investor sentiment.
