Oil drops to 3-month low as waning demand in US, China outweigh supply cuts; Brent crashes to $79/bbl | Mint
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Business News/ Markets / Commodities/  Oil drops to 3-month low as waning demand in US, China outweigh supply cuts; Brent crashes to $79/bbl
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Oil drops to 3-month low as waning demand in US, China outweigh supply cuts; Brent crashes to $79/bbl

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, was last trading lower by 2.81 per cent at ₹6,324 per bbl, having swung between ₹6,306 and ₹6,481 per bbl

FILE PHOTO: Brent crude futures fell $1.68, or 2 per cent, to $79.93 a barrel REUTERS/Alexander Manzyuk/File Photo (REUTERS)Premium
FILE PHOTO: Brent crude futures fell $1.68, or 2 per cent, to $79.93 a barrel REUTERS/Alexander Manzyuk/File Photo (REUTERS)

Oil prices declined more than $1 on Wednesday, November 8, to their lowest in more than three months on concern over waning demand in major oil consumers - United States and China. The US Energy Information Administration (EIA) said earlier this week that crude production in the US will rise by slightly less than previously expected but demand will fall.

Brent crude futures fell $1.68, or 2 per cent, to $79.93 a barrel, and US crude lost $1.78, or 2.3 per cent, to $75.59. Both benchmarks hit their lowest since late July, according to news agency Reuters. Crude is trading below its levels from before the Israel-Hamas war, which has failed to disrupt supplies from the Middle East.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, was last trading lower by 2.81 per cent at 6,324 per bbl, having swung between 6,306 and 6,481 per bbl during the session so far, against a previous close of 6,507 per barrel.

Also Read: India's oil demand up 4% in October, jet fuel consumption hits 43-month high: S&P Global

What's weighing on crude oil prices?

-The EIA now expects total US petroleum consumption to fall by 300,000 barrels per day (bpd) this year, reversing its previous forecast of a 100,000 bpd increase. US crude oil stocks rose by almost 12 million barrels last week, market sources said late on Tuesday, according to American Petroleum Institute figures. 

-Data from China, the world's biggest crude oil importer, showed its total exports of goods and services contracted faster than expected, fueling worries about the energy demand outlook. In the euro zone, data showing falling retail sales also highlighted weak consumer demand and the prospect of recession.

-Still, China's October crude oil imports showed a strong growth and its central bank governor said on Wednesday that the world's second-biggest economy is expected to hit its gross domestic product growth target this year. Beijing has set a target of about 5 per cent growth.

-India's oil demand is expected to grow by 258,000 bpd in 2023, revised higher by 9,000 bpd from S&P Global's previous update on strong diesel sales. The net oil impoter's total demand in 2023 is expected to be 7 per cent above 2019, before rising to about 11 per cent in 2024.

-Analysts from Goldman Sachs estimated that seaborne net oil exports by six countries from oil producer group Organisation of Petroleum Exporting Countries (OPEC) will remain only 0.6 million bpd below April levels. 

-OPEC has announced cumulative production cuts amounting to 2 million bpd since April 2023. In more bullish news for crude prices, OPEC expects the global economy to grow and drive fuel demand despite the economic challenges including high inflation and interest rates.

Where are prices headed?

Analysts noted that crude oil prices retreated on Tuesday, dipping below $78 per barrel to reach their lowest level since July, as concerns over a broader regional conflict stemming from the Israel-Hamas war were eclipsed by weaker-than-expected economic data from China. 

China's exports have declined for six consecutive months, with rising interest rates exerting downward pressure on global economic activity. A sharp decline in Chinese imports, exacerbating concerns about oil demand, fuelled a heavy sell-off in crude oil markets. 

Crude oil prices also fell as the dollar index rebounded ahead of the Federal Reserve Chairman's speech. Weakness in Asian and European markets, coupled with recession fears in the Eurozone, further weighed on crude oil prices. 

‘’We anticipate continued volatility in crude oil price. Crude oil finds support at $76.30-$75.50, with resistance at $78.10-$78.80. In INR terms, crude oil encounters support at 6,440- 6,350, while resistance lies at 6,575- 6,660,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd

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Published: 08 Nov 2023, 10:16 PM IST
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