Oil prices declined on Thursday as concerns about reduced demand during the winter season and uncertainty in China’s economy were more significant than hopes of reduced supplies from extended production cuts in Saudi Arabia and Russia.
Brent crude futures saw a 32-cent drop to $90.28 a barrel early this morning, marking the end of a nine-session winning streak. Similarly, U.S. West Texas Intermediate crude (WTI) futures experienced a 33-cent decline, reaching $87.21.
These fluctuations occurred after both benchmarks surged earlier in the week when Saudi Arabia and Russia, the world’s leading oil exporters, decided to extend their voluntary supply reductions until the end of the year.
These extensions came on top of the cuts made by several OPEC+ producers in April, which are set to continue until the end of 2024.
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Speaking about the development to Reuters, CMC Markets’ Shanghai-based analyst Leon Li said, “At present, it is really difficult for us to see any negative factors due to supply constraints. However, we need to consider possible demand risks, such as in the fourth quarter, the market could slow into an off-peak season for oil consumption after summer demand ends.”
China’s data presented a mixed picture in August, with overall exports dropping 8.8 percent compared to the previous year while imports contracted by 7.3 percent. However, crude imports surged by 30.9 percent year-on-year, which had an impact on prices.
Li, an expert, noted that the weakness in China’s data seems to be stabilising, as trade data showed slower declines than what market polls had predicted.
Additionally, the Chinese government has introduced several policies to boost the financial and real estate markets.
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However, Li emphasised that it is still too early to determine the pace of China’s demand recovery. Nonetheless, he expressed optimism that it would likely be better than in July.
There are worries about increased oil production from Iran and Venezuela, which might offset some of the reductions made by Saudi Arabia and Russia, and may also restrain market enthusiasm.
