By Ken Afor
Oil futures, Tuesday, retreated, canceling out the gains made the day prior, due to fear that lower demand resulting from a slowing global economy would be more impactful than the mutually agreed-upon production cuts between OPEC and Russia.
At 0013 GMT, Brent crude futures had decreased by 19 cents, or 0.2%, to $82.13 per barrel, while U.S. West Texas Intermediate (WTI) crude was at $77.68 per barrel, a decrease of 15 cents, or 0.2%.
On Monday, contracts for both oil futures rose by around 2% when three sources in OPEC+ informed Reuters that the collective organization of the Petroleum Exporting Countries (OPEC) and its affiliates are likely to contemplate increasing oil supply reductions at their meeting on November 26, 2023.
“Since worries on the demand side have not been dispelled, investors took a wait-and-see attitude to confirm the actual OPEC+ decision,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
Ueno mentioned that investors may think of the US dollar becoming weaker, which can serve as a booster for oil prices. “Going forward, the market will focus on U.S. and Chinese economic indicators and U.S. crude oil inventory levels to assess global demand trends.”
Since late September, the oil market has experienced a near 20% decrease in price due to elevated levels of production in the United States, the globe’s top producer, and worry over the rate of demand from China, the chief importer of oil.
Traders were keeping a close eye out for any indications of a decrease in demand due to the potential recession in the United States in 2024, as well as reacting to the alert given last week regarding the potential of deflation from Walmart, the largest retailer in the United States.
It is expected that U.S. crude and gasoline stockpiles probably increased last week, as per a pre-survey by Reuters on Monday, whilst distillate inventories are believed to have gone down. An analysis from the American Petroleum Institute is due to be released on Tuesday and the Energy Information Administration’s report will follow on Wednesday.
Eight analysts have anticipated that OPEC+ are prone to lengthen or even strengthen oil supply reductions until the next year.
According to Goldman Sachs, which is one of the analysts, deeper cuts should not be excluded from the OPEC decisions, due to the lower speculative positioning, increased time spreads, and higher inventory than anticipated.
