With U.S. West Texas Intermediate crude down 0.6% to $70.22 per barrel and Brent crude futures down 0.6% to $73.93 per barrel, oil prices are seeing their largest weekly decline in more than a month. Concerns about demand from China’s weakening economy, which expanded at its slowest rate since early 2023 in the third quarter, are a major factor in this fall.
Important Elements Affecting the Decline:
- Declining Demand: The International Energy Agency and OPEC lowered their 2024 and 2025 projections for the world’s oil consumption.
Reduction of Supply Risks: There are now fewer concerns about an Israeli retaliation strike against Iran that may halt Tehran’s oil supplies. - China’s Economic Slowdown: Weak fuel consumption and narrow refining margins caused refinery output to fall for the sixth consecutive month.
Factors that contrast:
US Economic Data: Crude prices were underpinned by strong retail sales data and a 92% possibility of a rate cut by the Federal Reserve in November.
Middle East Tensions: With Lebanon’s terrorist Hezbollah group intensifying its war against Israel, there are worries about potential price hikes brought on by simmering tensions.
Professional Opinions:
Senior market analyst Hani Abuagla of XTB MENA observes that although growth fears have been allayed by US economic statistics, market participants are still wary about China’s demand recovery in the wake of recent stimulus measures ¹. Using wishful thinking rather than a practical solution, Tamas Varga, an analyst with oil broker PVM, is skeptical that the assassination of Hamas leader Yahya Sinwar will result in substantive peace negotiations.
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