On Friday, oil prices increased amid production cuts, high US stockpiles, and worries of weakening demand battered markets.
In the Asian afternoon session, West Texas Intermediate (WTI) futures for January delivery climbed by 2.11% to $70.80. Brent futures expiring in February increased by 2.24% to $75.71 per barrel.
Despite the rebound, both benchmarks slipped to their weakest level since June. Crude prices are down 6.00% this week, poising near six-month lows on concerns about weak Asian demand and high US production.
Meanwhile, oil prices have bounced back amid the recent decline in the dollar. On Thursday, the greenback saw a notable drop due to persistent labor market weakness influencing US interest rate decisions.
Markets are now expecting more signals ahead of the US nonfarm payroll report, which is due later. However, a cooling labor market reduces interest rate prospects but signals a softer US economy, potentially decreasing oil demand.
Additionally, the Organization of Petroleum Exporting Countries and Allies (OPEC+) new production cuts of less than 1 million barrels per day may affect crude prices.
Russian and Saudi Arabian leaders contemplate more production cuts, yet OPEC+ discord hints at constrained prospects for future output reductions. Despite Russia and Saudi Arabia leading OPEC+ in supply cuts over the past year, their efforts only briefly elevated oil prices.
Asia’s Weak Demand Cues Oil Prices to Weekly Dip
Despite crude price recovery, fears about the Asian economy have led to the oil market’s decline this week.
China’s oil imports were down by 9.00% year-over-year (YoY) in November due to high inventories, weak economic indicators, and slowing orders. Meanwhile, in India, fuel consumption in the previous month dipped after a four-month high, impacted by reduced travel post-festivities.
Furthermore, crude’s recent losses were led by global economic growth concerns, spurred by weak data from Japan, the US, and the eurozone.
Analysts suggest that recent oversold oil prices may prompt a short-term recovery despite factors contributing to the market downturn. Experts anticipated Brent would trade in the low $80.00 range in the first quarter of 2024.