Oil prices saw a decline on Thursday, weighed down by concerns about a seasonal slowdown in demand during the winter months and uncertainties in China’s economic outlook. These factors overshadowed expectations of tighter supplies resulting from extended production cuts in Saudi Arabia and Russia.
Brent Crude Falls: Brent crude futures dipped by 36 cents to $90.24 a barrel by 0645 GMT, breaking a nine-session winning streak.
WTI Follows Suit: U.S. West Texas Intermediate (WTI) crude futures also fell, down 37 cents to $87.17 a barrel, ending seven consecutive sessions of gains.
Earlier in the week, both benchmarks had experienced surges following the announcements from Saudi Arabia and Russia, the world’s leading oil exporters, regarding their voluntary supply cuts extending through the end of the year. These cuts came in addition to the ongoing reductions agreed upon by several OPEC+ producers, which run until the end of 2024.
Analyst Leon Li from CMC Markets in Shanghai noted, “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.”
Market participants also examined mixed data from China. While overall exports fell by 8.8% year-on-year in August, and imports contracted by 7.3%, crude imports surged by 30.9%. Li highlighted some positive signs for the Chinese economy, including trade data declines that were less severe than expected and various government policies aimed at boosting financial and real estate markets. However, assessing the pace of China’s demand recovery remains a challenge.
Concerns persisted about rising oil output from countries like Iran and Venezuela, which could offset a portion of the cuts made by Saudi Arabia and Russia. BMI research analysts noted that the actions of OPEC+ were partially undermined by the return of sanctioned Iranian barrels, with Iranian crude production increasing year-to-date.
Moreover, there were concerns about potential upside risks to Venezuelan production forecasts, as U.S. officials reportedly considered easing sanctions in response to plans for new presidential elections in Caracas.
On a positive note, U.S. crude oil inventories were expected to have fallen by 5.5 million barrels in the week ending September 1, according to market sources citing American Petroleum Institute figures. Official inventory data from the U.S. Energy Information Administration was scheduled for release at 11 a.m. EDT (1500 GMT) on Thursday, further influencing market sentiment.