The oil market is failing and puncturing the important $80 support, experiencing bearish pressure despite confirmation of supply rationing.
The slowdown phase in the global economy, especially in China, and the effect of climate change, resulting in unusually high temperatures for the winter season, are weighing more heavily than the prospects of supply curtailment from Opec Plus countries, the expanded formulation of the cartel that also includes Russia.
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The oil market
The futures contract on light crude, the North American grade of crude, has broken out below the critical $80 threshold. The price this morning on the Nymex market fell to $79.48 per barrel, down 1.66 percent, after attempting a climb earlier in the week on confirmation of Opec supply rationing.
Crude oil thus completely wiped out the war premium won at the outbreak of the conflict between Israel and Hamas, when it had touched $95, to fall back to summer lows. The oerformance of the last week marks -6 percent after the -11 percent reported in October.
At the same time, Brent crude oil trades at $83.95/b, down 1.43% from the eve and very close to its lows since the summer, after reaching a high of $98 in conjunction with the outbreak of the conflict in Gaza.
Opec’s offer
Saudi Arabia, the world’s top oil exporter, made it known Sunday that it will maintain its voluntary production cut of 1 million barrels per day until the end of the year. A spokesman for the Saudi Energy Ministry made this clear in a note, reiterating that by the end of the year, Arabia’s crude oil production will be 9 million barrels per day.
“This additional voluntary cut reinforces the precautionary efforts made by OPEC countries with the aim of supporting the stability and balance of oil markets,” the source said in the note.
“The new cut will be reviewed next month to consider its extension, deepening or increase in production,” the source recalled, and “is in addition to the previously announced voluntary cut from April 2023 until the end of December 2024,” going to “reinforce the precautionary efforts made by OPEC Plus to support the stability and balance of oil markets.”
Russia has also confirmed in an official note its willingness to renew its production cuts, which in this case amount to 300 thousand barrels per day until the end of December, but also on the decisions is the complicated issue of sanctions imposed by the West, which effectively limit its exports.
Global demand slows down
The International Energy Agency (IEA) last month cut its global crude oil demand growth forecast for 2024, taking into account the worsening economic growth forecast.
The IEA now estimates demand growth of 880,000 barrels in 2024, instead of 1 million previously indicated, partly in view of the slowdown in consumption induced by energy efficiency measures and increased use of electric vehicles.
What do experts expect?
Experts now see more pressure on the price of crude oil, with a war premium has all but cleared, and are watching with interest the Chinese inflation data due out this week. Negative data could indeed put further pressure on the oil market.
Although China’s oil imports and fuel demand have remained robust this year, inventories have also increased, which could spur a decline in oil imports in the coming months.
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