Oil prices have continuously declined for the seventh week in a row. This marks the longest period of weekly losses since 2018. The decline can be attributed to concerns about global excess supply and weak Chinese demand. However, there was a slight recovery in prices today, Friday, after Saudi Arabia and Russia urged more OPEC+ members to join the production reduction agreement.
Price action
At 3:59 AM GMT, Brent crude futures increased by $1.29 or 1.7% to $75.34 per barrel, while West Texas Intermediate crude futures increased by $1.11 or 1.6% to $70.45 per barrel.
During the last session, both benchmarks hit their lowest levels since late June, indicating oversupply in the market according to traders.
According to a note by analysts from Haitong Futures, OPEC+ improved solidarity to calm the market amid declining oil prices.
Yesterday, on Thursday, Saudi Arabia and Russia, which are the two biggest oil exporting countries in the world, urged all OPEC+ members to participate in the agreement to reduce oil production. They stated that this move was in the best interest of the global economy. This call came just a few days after a challenging meeting of the alliance.
The Organization of the Petroleum Exporting Countries and its allies, OPEC+, have agreed to cut oil production by a total of 2.2 million barrels per day in the first quarter of next year.
Victor Katona, the chief crude oil analyst at Kpler, has stated that even though OPEC+ members have made pledges to reduce production, there will only be a decrease of 350,000 barrels per day from December 2023 to January 2024. This will bring the total production from OPEC+ countries down from 38.23 million barrels per day to 37.92 million barrels per day.
Katona mentioned that some OPEC+ countries may not meet their obligations due to uncertainty around quota basis and reliance on oil and gas revenues.
Brent and West Texas Intermediate crude futures are down 4.5% and 4.8% respectively for the week – their biggest losses in 5 weeks.
Concerns regarding China’s economy and increased US oil production led to this week’s market decline.
Chinese customs data for November showed a 9% YoY decrease in crude oil imports due to high inventory levels, weak economic indicators, and slowing demand from independent refineries.
In November, fuel consumption in India declined due to reduced travel, resulting in a four-month low after reaching a peak the previous month, as India is the third-largest oil consumer in the world.
Data released by the US Energy Information Administration on Wednesday indicated that oil production in the United States remained close to a record high of over 13 million barrels per day.
