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Crude oil prices were set for their seventh weekly loss in a row as concern about oversupply and weaker demand wiped off any residual effect of the latest OPEC+ production cut agreement.
Concern about oversupply emerged earlier this month after the Energy Information Administration reported that U.S. production of crude had reached a record high of 13.2 million barrels daily.
The bearish news was reinforced by lingering doubts about the robustness of demand from China as evidenced by a slowdown in imports. Last month, these stood at the lowest in four months suggesting a certain cooling off in China’s insatiable thirst for crude. That cooling may well have had something to do with higher prices.
Meanwhile, "Some short sellers closed their position as the oil market was seen oversold. Meanwhile, the plunging oil prices forced OPEC+ to improve solidarity to calm the market," Haitong Futures analysts said in a note cited by Reuters.
Bloomberg noted that if oil closes this week with yet another loss, it will be the longest losing streak for the commodity since 2018.
“The oil demand outlook remains bleak,” Ravindra Rao, head of commodity research at Kotak Securities in India told Bloomberg. “China’s recovery failed to gain traction, while Western factory activity continues to be in contraction.”
A Bloomberg survey points to oil demand growth in China of 500,000 bpd next year, which is substantially lower than the rate of demand growth demonstrated this year.
Not just that but, according to Kpler analysts, the actual OPEC+ cuts will be much lower than the level agreed at the last meeting.
"Despite OPEC+ members' pledges, we see total production from OPEC+ countries dropping by only 350,000 bpd from December 2023 into January 2024 (38.23 million bpd to 37.92 million bpd)," Viktor Katona, lead crude analyst at the tanker tracking firm, told Reuters.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.