Investing.com– Oil prices hovered around a four-month low in Asian trade on Friday, and were headed for steep weekly losses amid signs of increased supplies and fears of worsening global demand.
A bigger-than-expected build in U.S. , coupled with record-high production levels, saw traders betting that oil supplies in the world’s largest fuel consumer were not as tight as initially expected.
On the demand front, signs of steady U.S. fuel demand were largely offset by a series of weak economic prints from Japan, China, and the euro zone. Uncertainty over higher U.S. interest rates also crept back into markets, as data showed that while inflation eased in October, retail spending remained steady.
The storm of negative cues put crude on course for a fourth straight week of losses.
rose 0.1% to $77.56 a barrel, while rose 0.1% to $73.00 a barrel by 20:34 ET (01:34 GMT) . Both contracts were down more than 5% each this week.
“It has become clearer that the oil balance for the remainder of this year is not as tight as initially expected. Higher-than-expected supply has eroded a large amount of the expected deficit over 4Q23. And as things stand, the market is still expected to return to surplus in 1Q24,” ING analysts wrote in a recent note.
Saudi, Russia cuts in focus
While Saudi Arabia and Russia had announced a series of production cuts to help support oil prices, other members of the Organization of Petroleum Exporting Countries were seen increasing production in recent months.
Focus is now squarely on an upcoming on Nov 26, where Saudi Arabia and Russia are now expected to roll over their roughly 2 million barrels per day supply cuts into 2024.
The two recently vowed to maintain their cuts until end-2023.
“…it is increasingly likely that the Saudis will roll over their additional voluntary cut of 1 million barrels per day into early next year. Doing this should help erase the expected surplus and provide some support to the market,” ING analysts said.
Crude’s recent run of losses was sparked by easing concerns over the Israel-Hamas war, as traders priced in a smaller risk premium from the conflict after it proved to have little impact on Middle Eastern supplies.
This was exacerbated by a string of weak economic readings from major importer China, which showed that business activity remained subdued in October. While Chinese oil imports during the month still remained steady, a massive build-up in the country’s inventories brewed concerns over slowing import demand in the coming months.
Chinese refineries were also seen processing smaller volumes of crude in the past month.
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