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Oil prices settle lower as demand concerns weigh

Published 16/11/2023, 01:18 pm
Updated 17/11/2023, 07:18 am
© Reuters.

Investing.com -- Oil prices settled lower Thursday, to remain on course for a fourth-straight weekly slump as rising U.S. crude stockpiles and signs of easing China demand weighed on sentiment.   

By 14:30 ET (19.30 GMT), the U.S. crude futures settled 4.9% lower at $72.90 a barrel, while the Brent contract dropped 4.6% to $77.42 a barrel. 

Signs of easing China demand, global growth jitters weigh

Chinese refiners processed lower amounts of oil in October than the prior month, adding to concerns about the demand outlook for the world's largest oil importer at a time when slowing global growth is expected to weigh on demand.

Despite the demand concerns, however, "supply growth is still limited, which we believe will support prices by year- end 2024," Wells Fargo (NYSE:WFC) said in a Wednesday note.

Economic data, meanwhile, pointed to weakness in Europe also weighed on the demand outlook.  

The European Commission on Wednesday cut its growth forecast for the eurozone in 2023 to 0.6% from the 0.8% expected in September, citing high inflation, rising interest rates and weak external demand.

Additionally, both industrial and manufacturing production slumped in the U.S. in October, while weekly jobless claims rose more than expected.

Surging U.S. weekly crude inventories continue to pressure oil prices 

Data from the U.S. Energy Information Administration, released on Wednesday, showed that U.S. crude stocks rose by far more than expectations.

U.S. crude production also held steady at a record 13.2 million barrels per day, suggesting the world’s top producer may be near peak output.

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“The EIA’s weekly inventory report made a comeback yesterday after its absence last week due to a planned system upgrade,” said analysts at ING, in a note. “The release showed that US crude oil inventories increased by 3.59MMbbls over the last week to a little over 439MMbbls - the highest since August.”

“While this still leaves stocks below the 5-year average, they are trending back towards more typical levels for this time of year.”

U.S. to enforce Iranian sanctions 

In the Middle East, with the Israel-Hamas conflict appearing to be escalating in Gaza, the U.S. administration has  vowed to enforce oil sanctions against Iran, the country which has long supported Hamas.

“While U.S. sanctions have remained in place, the U.S. has not enforced them strongly, which has allowed Iranian oil exports to grow this year,” said ING. “If we see stricter enforcement of these sanctions, we could possibly see anywhere between 500Mbbls/d-1MMbbls/d of supply lost, which would be enough to tighten up the global oil balance significantly through 2024.” 

(Peter Nurse and Ambar Warrick contributed to this report.)

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