Oil Slides to 10-Week Low as US Dollar Rally
Oil prices slumped to a 10-week low on Tuesday due to a stronger US dollar worsening energy costs while a weak macro sentiment outweighed more positive data from China.
Brent crude is 1.5% lower at $83.86 a barrel. West Texas Intermediate (WTI) crude futures slipped to $80 per barrel on Tuesday, giving back gains from the previous session as investors continued to assess the global demand and supply outlooks.
This is the first time it has dropped below $80 since late August. Markets also digested data showing Chinese exports fell more than expected in October, clouding the demand outlook in the world’s top crude importer.
Moreover, oil prices came under pressure recently, losing nearly 6% last week, amid growing optimism that the Israel-Hamas war could be prevented from spreading through the Middle East and disrupting oil supply from the region.
The market report showed that WTI price rose 0.4% on Monday after top crude producers Saudi Arabia and Russia reaffirmed their commitment to additional voluntary oil supply cuts until the end of the year.
Chinese trade data shows that oil imports rose in October to 49 million metric tons, according to ANZ Research. “The risk of rising oil prices and additional import quotas for the year encouraged refiners to buy more oil,” ANZ said.
Despite the positive data, the dollar is up 0.2%, with the market now pricing the chance of another rate hike from the Federal Reserve at 16%, up from 11% Friday, according to Deutsche Bank.
Saudi Arabia made two recent decisions that seem to indicate a steady crude oil market outlook but may point to a ticking up in concern over the state of demand.
The world’s largest oil exporter said it will keep prices for its benchmark crude grade steady for Asian customers for December cargoes, and also announced that it will maintain its voluntary production cut until the end of the year.
Saudi Arabia said on Nov. 5 that it will extend its voluntary 1 million barrels per day (bpd) output cut for another month for December.
The kingdom initiated the extra production cut in July in addition to reductions already agreed as part of the wider OPEC+ group, ostensibly to provide stability to the crude market, although most observers saw the cut as an effort to bolster prices.
The extension of the additional 1 million bpd cut is perhaps a tacit admission that crude oil demand isn’t as strong as OPEC has been expecting.
It’s worth noting that oil produced and exported in December only reaches refiners in Asia several weeks later, meaning that Saudi Arabia is likely not anticipating a surge in demand for crude in the first quarter of 2024.
Asia’s crude imports showed some resilience in October, rising to 27.36 million bpd from 26.60 million bpd in September.
However, October’s imports were only the sixth-highest monthly total in 2023 on a barrels per day basis, suggesting that the top-importing region has lost some of its appetite for crude in the second half of the year.
China, the world’s biggest importer, saw arrivals of 11.90 million bpd in October, up from September’s 11.18 million bpd, but both these months were down on August’s 12.49 million bpd.
August would have been the last month that crude was bought before the strong rally in prices from early July onwards, sparked by Saudi Arabia’s additional output cut. Naira Devaluation Deepens Economic Crisis in Nigeria
