– Markets wary of more hawkish signals from Fed
– Saudi and Russian voluntary oil cuts to continue to year-end
– Weak US and Chinese data raises oil demand fears
London — Oil prices rose on Monday, after OPEC issued a report that countered market concern over waning demand in the United States and China, compounded by mixed signals from the U.S. Federal Reserve.
Brent crude futures for January were up 73 cents at $82.16 a barrel by 1445 GMT, having lost $1 in early trading, while U.S. West Texas Intermediate (WTI) crude futures for December were up 70 cents at $77.87.
Despite some crude price losses being recouped on Friday as Iraq voiced support for oil production cuts by the OPEC+ producer group, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, they still fell about 4% on the week to register the first three-week losing streak since May.
In a monthly report on Monday, OPEC said that oil market fundamentals remained strong and blamed speculators for a drop in prices. OPEC made a slight increase to its 2023 forecast for global oil demand growth and stuck to its relatively high 2024 prediction.
“The OPEC monthly oil market report appeared to push back against demand concerns, referencing overblown negative sentiment around Chinese demand while raising demand growth forecasts for this year and leaving them unchanged for next,” Craig Erlam, senior market analyst at OANDA, said in a note on Monday.
Investors had been worried after the U.S. Energy Information Administration (EIA) last week said that the country’s crude oil production this year will rise by slightly less than previously expected and that demand will fall.
Next year, per capita U.S. gasoline consumption could fall to the lowest level in two decades, it said.
Markets were also wary of potential U.S. policy tightening after Federal Reserve Chair Jerome Powell said last week that it could raise interest rates again if inflation isn’t curbed.
More hawkish Fed speak is “not a prospect that crude oil will welcome, given that recent data in China and the U.S. has brought growth fears back to the surface”, said IG market analyst Tony Sycamore.
Weak economic data last week from China, the world’s biggest crude oil importer, also raised fears of faltering demand. Chinese refiners asked for less supply for December from Saudi Arabia, the world’s largest exporter.
China’s consumer prices fell to pandemic-era lows last month, sparking concern about the country’s economic recovery.
Still, if WTI approaches $75 a barrel, “we will likely see support buying on expectations that Saudi Arabia and Russia would decide to continue their voluntary supply cuts after December”, said Hiroyuki Kikukawa, president of NS Trading, part of Nissan Securities.
Last week top oil exporters Saudi Arabia and Russia, part of OPEC+, confirmed they would continue with additional voluntary oil output cuts until the end of the year as concerns over demand and economic growth continue to drag on crude markets.
The next OPEC+ meeting is scheduled for Nov. 26.
*Paul Carsten & Yuka Obayashi & Colleen Howe, editing: Bernadette Baum, Louise Heavens & David Goodman – Reuters
