Oil prices stage small recovery after hitting six-month lows

Brent and WTI attempt rebound from 6-month lows on Thursday

On Thursday, oil prices rebounded from a six-month low seen the previous day, although concerns persisted among investors regarding sluggish demand in both the U.S. and China.

Brent crude futures saw an increase of 90 cents, or 1.17%, reaching $75.20 per barrel at 16:45 GMT. Similarly, U.S. West Texas Intermediate crude futures rose by 95 cents, or 1.37%, to $70.29 per barrel.

In a comment to the Reuters news agency, PVM Oil analyst John Evans said:

“With the largest global importer of oil (China) shuttering its thirst for crude, pressure remains on prices as the largest producer, the United States, continues with headline output.”

During the previous session, market anxiety was fueled by data indicating that U.S. output remains close to record highs despite a decrease in inventories, as noted by analysts at Australian bank ANZ.

Data from the U.S. Energy Information Administration (EIA) on Wednesday revealed a significant rise in U.S. gasoline stocks, which went up by 5.4 million barrels to a total of 223.6 million barrels, exceeding expectations for a 1-million-barrel increase.

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China oil imports: November figures fall year-on-year

Worries about China's economic situation also restrained upward momentum in oil prices. Chinese customs data showed a 9% year-on-year decline in crude oil imports for November, attributed to elevated inventory levels, weak economic indicators, and reduced orders from independent refiners.

Although China's overall imports decreased on a monthly basis, exports experienced growth in November for the first time in six months, suggesting potential benefits for the manufacturing sector from an increase in global trade flows.

Moody's placed Hong Kong, Macau, various Chinese state-owned firms, and banks on downgrade warnings on Wednesday, just a day after issuing a downgrade warning on China's sovereign credit rating.

In his morning notes on Thursday, Markets.com Chief Market Analyst Neil Wilson recapped the recent oil market dynamics:

“Oil tumbled further as US oil exports surge - Kpler and Vortexa said American shipments for the week ended in Dec 1st could reach 5.7mn bpd. This just goes to the heart of the problem facing OPEC – it cannot be the swing producer of last resort if the US is pumping like mad. Crude prices this morning are trying to rally from a 6-month low as data showed China exports in November grew 0.5% yoy vs f/c -1.1%, though imports fell 0.6% vs f/c +3.3% and overall the data indicated China is still struggling to grow its economy. Shares in Shenzhen hit a 5-year low, whilst Hong Kong slipped to its weakest in over a year.”

OPEC+ cuts: Oil prices shed 10% since group announces voluntary cuts for 2024

Oil prices have dropped approximately 10% since OPEC+ (Organization of the Petroleum Exporting Countries and allies) announced a joint 2.2 million barrels per day voluntary output cut for the first quarter of the next year.

The price of U.S. benchmark West Texas Intermediate crude has dropped by over 7% over the past week, despite recent gains. Brent crude futures have slid by close to 6.5% over the same period.

On Thursday, Saudi Arabia and Russia, the two largest oil exporters globally, urged all OPEC+ members to endorse an agreement on output cuts for the sake of the global economy.

Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met the previous to discuss further cooperation on oil prices.

OPEC+ member Algeria indicated on Wednesday that it would consider extending or deepening oil supply cuts, responding to the fall in oil prices to a new five-month low, despite OPEC+ announcing cuts the previous week.

Russian Deputy Prime Minister Alexander Novak also said on Tuesday that the group was prepared to enhance oil production cuts in the first quarter of 2024 to address what he described as speculation and volatility.

In response to requests from OPEC+, Russia pledged to provide more data on the volume of its fuel refining and exports, enhancing transparency on classified fuel shipments from various export points across the country, according to sources at OPEC+ and ship-tracking firms cited by Reuters.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.