Oil prices retreated on Monday, reversing the gains seen on Friday, as concerns about diminished demand in the United States and China weighed on market sentiment.
Brent crude futures for January declined by 0.4%, or 35 cents, to reach $81.08 a barrel at 0051 GMT. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures for December were down 0.5%, or 35 cents, at $76.82.
While both benchmarks recorded nearly a 2% increase on Friday following Iraq’s support for OPEC+ oil cuts, they experienced a 4% decline for the week, marking their third consecutive weekly losses, the first since May.
Hiroyuki Kikukawa, President of NS Trading, noted, “Investors are more focused on slow demand in the United States and China while worries over the potential supply disruptions from the Israel-Hamas conflict have somewhat receded.”
The U.S. Energy Information Administration (EIA) reported last week that crude oil production in the United States is expected to rise slightly less than previously anticipated this year, coupled with a decrease in demand.
Concerns over faltering demand increased with weak economic data from China, the largest crude oil importer globally. Refiners in China also requested less supply from Saudi Arabia, the world’s leading exporter, for December.
Despite these challenges, Kikukawa suggested that oil prices could find support if WTI approaches $75 a barrel. He added, “If the market falls further, we will likely see support buying on expectations that Saudi Arabia and Russia would decide to continue their voluntary supply cuts after December.”
Saudi Arabia and Russia confirmed last week that they would extend their additional voluntary oil output cuts until the end of the year. OPEC+ is scheduled to meet on November 26 to discuss the situation further.
On the supply side, U.S. energy firms reduced the number of oil rigs for the second consecutive week, reaching the lowest count since January 2022, according to energy services firm Baker Hughes. The rig count serves as an indicator of future output.
