Oil Stages Small Recovery as Weak Economic Outlook Lingers

Oil Stages Small Recovery as Weak Economic Outlook Lingers
An employee holds a sample of crude oil at the Yarakta oilfield, owned by Irkutsk Oil Co., in the Irkutsk region, Russia, on March 11, 2019. (Vasily Fedosenko/Reuters)
Reuters
12/7/2023
Updated:
12/7/2023
0:00

LONDON—Oil prices reclaimed some ground on Thursday after tumbling to a six-month low the previous day but investors remained concerned about sluggish demand in the United States and China.

Brent crude futures were up 76 cents, or 1 percent, to $75.06 a barrel at 0924 GMT. U.S. West Texas Intermediate crude futures was up 67 cents, also 1 percent, to $70.05 a barrel.

“With the largest global importer of oil (China) shuttering its thirst for crude, pressure remains on prices as the largest producer, the United States, continues with headline output,” PVM Oil analyst John Evans said.

In the previous session, the market was spooked by data showing U.S. output remains near record highs even though inventories fell, analysts at ANZ said in a note.

U.S. gasoline stocks rose by 5.4 million barrels last week to 223.6 million barrels, Energy Information Administration data showed on Wednesday, far exceeding expectations for a 1 million-barrel build.

Concerns about China’s economy also put a lid on oil’s price gains. Chinese customs data showed that crude oil imports in November fell 9 percent from a year earlier, as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.

While China’s total imports dropped on a monthly basis, exports grew for the first time in six months in November, suggesting the manufacturing sector may be beginning to benefit from an uptick in global trade flows.

Ratings agency Moody’s put Hong Kong, Macau, and swathes of China’s state-owned firms and banks on downgrade warnings on Wednesday, just one day after it put a downgrade warning on China’s sovereign credit rating.

Oil prices have fallen by about 10 percent since the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, announced a combined 2.2 million barrels per day voluntary output cuts for the first quarter next year.

Meanwhile, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met to discuss further oil price cooperation on Wednesday as members of OPEC+, which may strengthen the market’s confidence in the impact of output cuts.

OPEC+ member Algeria said on Wednesday it would not rule out extending or deepening oil supply cuts as oil prices fell to a new five-month low even though OPEC+ announced cuts last week.

Russian Deputy Prime Minister Alexander Novak said on Tuesday the group stood ready to strengthen oil production cuts in the first quarter of 2024 to eliminate what he said was speculation and volatility.