In the volatile world of global oil markets, prices remained steady on Monday, reflecting persistent concerns about a surplus in crude oil despite efforts by the OPEC+ alliance to curtail production and projections of softer fuel demand growth in the coming year.
As of 1427 GMT, Brent crude futures experienced a marginal dip of 6 cents, settling at $75.78 per barrel. Simultaneously, U.S. West Texas Intermediate crude futures saw a 7-cent decline, reaching $71.16. Although both contracts witnessed a more than 2% surge on Friday, this marks the seventh consecutive week of decline—their lengthiest streak since 2018—fueled by ongoing apprehensions about an oversupply glut.
In a note issued on Monday, John Evans, an oil broker at PVM, emphasized the precarious nature of the oil complex. “There is little doubt that the oil complex remains in a state of vulnerability,” he stated.
Despite the OPEC+ group’s commitment to slashing 2.2 million barrels per day (bpd) of crude oil production in the first quarter, investor skepticism about compliance persists. Concerns have been heightened by anticipated output growth in non-OPEC countries, which could contribute to excess supply in the coming year.
RBC Capital Markets anticipates stock draws of 700,000 bpd in the first half, with only 140,000 bpd projected for the entire year. “Prices will remain volatile and directionless until the market sees clear data points pertaining to the voluntary output cuts,” noted analysts at RBC.
The implementation of cuts is scheduled for next month, contributing to a potentially volatile two months before quantifiable compliance data provides clarity, according to RBC analysts.
Recent data from China, the largest oil importer globally, revealed rising deflationary pressures. Weak domestic demand raised doubts about the country’s economic recovery, prompting Chinese officials on Friday to pledge efforts to stimulate domestic demand and enhance economic recovery in 2024.
Investors are closely monitoring guidance on interest rate policies from five central banks, including the U.S. Federal Reserve, this week. U.S. inflation data will also be scrutinized to assess potential impacts on the global economy and oil demand.
In response to recent price weakness, the United States has sought up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR) in March 2024. Analysts, such as Tony Sycamore from IG, noted that this move, along with support from technical chart indicators, is expected to provide a stabilizing effect on prices.
Simultaneously, at the COP28 summit on Monday, a draft of a potential climate deal outlined various options for countries to reduce greenhouse gas emissions. However, it notably omitted the “phase out” of fossil fuels—a demand echoed by many nations. U.N. Secretary General Antonio Guterres emphasized that the benchmark of success for COP28 would be a deal fast enough to avert disastrous climate change, including the phasing out of coal, oil, and gas.
In conclusion, global oil prices maintain a sense of stability, with prices holding steady despite ongoing concerns about crude oversupply, reflecting a resilient and balanced outlook in the face of various challenges.
Source: Reuters
