Oil futures traded around the same levels early on Friday, but were facing significant weekly declines as investors grew increasingly worried about demand. The focus has shifted away from tightening supplies after signs emerged that a surge towards $100 per barrel was actually negatively impacting demand.
The recent surge in bond yields, with long-term Treasury rates reaching 16-year highs, has also fueled concerns about the economic outlook and the prospects for future demand.
Here are the latest developments in the oil market:
- West Texas Intermediate crude for November delivery (CL00 CL CLX23) remained flat at $82.31 a barrel on the New York Mercantile Exchange. This puts it on track for a weekly decline of 9.4%.
- December Brent crude (BRN00 BRNZ23), which serves as the global benchmark, saw a minor increase of 4 cents, or less than 0.1%, to reach $84.11 a barrel on ICE Futures Europe. Even with this slight increase, it is still experiencing an overall decline of 8.9% for the week.
- November gasoline (RBX23) rose by 1.1% to $2.213 per gallon. This helped to minimize its weekly loss to 7.8%. At the same time, November heating oil (HOX23) gained 1.6% to reach $2.915 per gallon, resulting in an overall decline of 11.7% for the week.
- November natural gas (NGX23) saw a slight increase of 0.2%, reaching $3.173 per million British thermal units. If this upward trend continues, it is expected to experience a weekly rise of more than 8%.
A Retreat After Reaching New Heights
After briefly surpassing $95 per barrel last week, WTI experienced a significant pullback. This surge marked its first time reaching such levels since August of 2022. Meanwhile, Brent came within a few dollars of the $100 threshold but has since retraced its steps.
Crude Oil Outlook: Market Sentiment Shifts Towards Weaker Demand
Crude oil prices had experienced a significant rally during the summer and fall months, largely driven by concerns over a growing supply deficit. This was further exacerbated by Saudi Arabia’s decision to implement a production cut of 1 million barrels a day in July, which has recently been extended through the end of the year. Russia has also taken measures to reduce exports by 300,000 barrels a day during this same period.
However, there has been a notable shift in market sentiment in recent days. Analysts at Commerzbank highlighted this change, stating that the market’s focus has now switched from concerns about tight supply to worries about weaker demand.
This change in sentiment was prompted by a report from the U.S. Energy Information Administration, which revealed that average gasoline demand over the past four weeks dropped to its lowest level in 25 years for this time of year.
With this shift in market sentiment, it is important to consider the impact it may have on oil prices. It is worth noting that news reports have also indicated that Russia’s government decided to lift a ban on most diesel exports that had been in place since last month, although a ban on gasoline exports remains unchanged for now.
Given these recent developments, it is clear that the crude oil market is experiencing a delicate balance between supply and demand factors. As we move forward, it will be crucial to closely monitor how these dynamics continue to unfold and their implications for oil prices.
See: Demand destruction sinks oil prices as gasoline inventories send warning signal