Oil Prices Slide on Weak Demand Expectation
The global oil prices dipped on Monday due to a weak demand outlook amidst US economic concerns. Brent price dipped by 0.65% to $82.93 per barrel on Monday. The American benchmark, West Texas Intermediate (WTI), traded at the same time at $77.89 per barrel, down 0.72% from Friday’s close of $78.46 per barrel.
The oil market opened lower this morning after settling higher at the end of last week amid a subdued demand outlook and mixed macro picture despite the ongoing Middle East tensions.
Last week, the Energy Information Administration, IEA, highlighted its concerns over slowing global oil demand and higher non-OPEC supply leaving the oil market in a surplus for the year.
However, the ongoing attacks on shipping in the Red Sea and the ongoing Israel-Hamas war are limiting any major downside for oil prices, ING commodities strategists said in a Monday note.
Weekly data from Baker Hughes shows that the US oil rigs fell by two rigs over the last week, with the total oil rig count standing at 497, while the gas rigs remained unchanged, taking the total rig count (oil & and gas combined) to 621 for the week ending 16 February 2024.
The volatility in the oil and gas prices is currently weighing on the rig additions. The extended conflict in the Middle East is posing a continuous threat to the oil supplies resulting in rising money managers’ bullish bets for oil, according to ING note.
Recent figures from the US Commerce Department have compounded these concerns, with January’s retail sales data revealing a significant drop. Sales fell by 0.8% to $700.3 billion, marking a more considerable decline than the forecasted 0.2%.
This downturn in consumer spending is seen as a potential indicator of a broader economic slowdown, which could influence the Fed’s monetary policy decisions.
Market participants have been closely eyeing the Fed’s moves, with a consensus previously leaning towards steady policy rates. However, expectations are now adjusting, with a 75% likelihood assigned to the Fed initiating rate cuts by June, a timeline that suggests a cautious approach to stimulating the US economy.
Investors are awaiting the minutes of the Fed’s latest Federal Open Market Committee (FOMC) meeting, set to be released on Wednesday, for any hints regarding the central bank’s future actions.
Last week’s concerns over a supply glut in 2024 dragged on to the start of this week and exerted downward pressure on prices as the International Energy Agency (IEA) said global oil supply is projected to outpace demand.
“This was in stark contrast to OPEC, which sees more robust consumption amid ongoing supply constraints to support prices in its monthly oil market report,” according to Daniel Hynes, a commodity strategist at Australia and New Zealand Banking Group.
Prices also found some support from data showing that Russia had almost reached its target for voluntary supply reductions for the first time since making the output cut pledge last year, Hynes added. #Oil Prices Slide on Weak Demand Expectation Africa Countries Top World’s 20 Fastest-Growing Economies in 2024
