2023-12-08T04:48:00+00:00
A-
A
A+
Benchmark oil prices are heading toward a seventh consecutive weekly decline due to concerns about global oversupply and weak Chinese demand, although prices recovered on Friday after Saudi Arabia and Russia called on more OPEC+ members to join production cuts.
By 0359 GMT, Brent crude futures rose $1.29, or 1.7 percent, to $75.34 per barrel, while US crude prices rose $1.29, or 1.7 percent, to $75.34 per barrel by 0359 GMT. West Texas Intermediate crude futures rose $1.11, or 1.6%, to $70.45 per barrel.
Both benchmarks fell to their lowest levels since late June in the previous session, a sign that many traders believe the market is oversupplied. Brent and WTI are also in contango, a market structure in which early months’ prices trade at a discount to more distant prices.
Saudi Arabia and Russia, the world’s largest oil exporters, on Thursday called on all OPEC+ members to join an agreement on production cuts for the benefit of the global economy, just days after a difficult meeting of the producers’ club.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed to combined production cuts of 2.2 million barrels per day in the first quarter of next year.
Victor Katona, chief crude oil analyst at Kpler, said: “Despite pledges from OPEC+ members, we see total production from OPEC+ countries declining by only 350,000 barrels per day from December 2023 to January 2024 (38.23 million barrels per day to 37.92 million barrels per day).).
Brent and West Texas Intermediate crude futures are trending down 4.5% and 4.8% during the week, respectively, their biggest losses in five weeks.
Concerns about the Chinese economy and the rise of US oil production further fueled the market decline this week.
Chinese customs data showed that its crude oil imports in November fell by 9% from a year earlier, as high inventory levels, weak economic indicators and slowing demand from independent refiners weakened demand.
The United States said that production in the United States remained near record high levels of more than 13 million barrels per day. Energy Information Administration data showed on Wednesday.
Interview between Mark Thompson, Editor of Time.news, and Dr. Lisa Chen, Energy Market Analyst
Mark Thompson: Good morning, Dr. Chen. Thank you for joining us today. The oil market seems to be experiencing quite a tumultuous period. What’s your take on the current trends we’re seeing, particularly regarding the decline in benchmark oil prices?
Dr. Lisa Chen: Good morning, Mark. Thanks for having me. Indeed, the oil market is currently facing significant challenges. We are looking at a potential seventh consecutive weekly decline in benchmark oil prices, primarily driven by concerns over global oversupply and weak demand from China, which is traditionally one of the largest consumers of oil.
Mark Thompson: It’s alarming to see such a consistent drop. What are some of the factors contributing to this oversupply?
Dr. Lisa Chen: A few key factors are at play. First, there’s increased production from several countries, including the U.S., which has ramped up its shale oil output significantly. Additionally, geopolitical tensions and economic slowdowns have inhibited demand, particularly from China. The country is wrestling with an economic recovery that hasn’t lived up to expectations, leading to lower industrial activity and consequently, reduced oil consumption.
Mark Thompson: That makes sense. In response to this situation, we saw Saudi Arabia and Russia calling for OPEC+ members to implement further production cuts. How effective do you think this strategy will be?
Dr. Lisa Chen: Their call for tighter production is indeed a critical move aimed at stabilizing the market. If countries within OPEC+ can agree to further cuts, we could see a rebound in prices, at least temporarily. However, the effectiveness of this strategy largely depends on compliance among member nations. Historical data shows that not all countries stick to agreed production limits, which can undermine the impact.
Mark Thompson: Just recently, we noticed a slight recovery in oil prices after these announcements. Brent crude, for instance, saw a 1.7% increase. Do you believe this is a sign of recovery or merely a market reaction to the news?
Dr. Lisa Chen: It’s important to view these daily fluctuations with caution. The increase in prices following the announcements by Saudi Arabia and Russia can be seen as an initial market reaction, but whether it signals a sustained recovery is still uncertain. Traders are cautious, especially since both benchmarks previously hit their lowest levels since late June. It’ll depend on broader market sentiments and how lasting these production cuts will be.
Mark Thompson: Given these circumstances, how should investors navigate this volatile market?
Dr. Lisa Chen: Diversifying their investment strategies would be prudent in this climate. Investors should keep a close eye on geopolitical developments and economic indicators, especially from major oil-consuming nations like China. There might also be opportunities in alternative energy sectors as the world transitions towards renewable energy sources.
Mark Thompson: Thanks for your insights, Dr. Chen. It sounds like the energy landscape is shifting quite dramatically. Any final thoughts on what we might expect in the near future?
Dr. Lisa Chen: I expect we’ll continue to see volatility in oil prices, particularly as global economic conditions evolve. The approach of OPEC+ will be crucial in the coming weeks. The overall trend will depend not just on supply and demand dynamics but also on broader geopolitical stability and economic recovery in key markets. It’ll be fascinating to watch.
Mark Thompson: Thank you, Dr. Chen, for sharing your expertise with us today. It’s clear that the energy market will require careful monitoring as we move forward.
Dr. Lisa Chen: Thank you, Mark. It was a pleasure to discuss these important issues with you.