Alex Longley
2023-11-09
Synopsis
Oil prices recovered from a three-month low as technical indicators suggested a possible end to the price slump. Concerns over global demand and increased supply have weighed on the market. However, Saudi Arabia's energy minister and the Secretary General of OPEC have highlighted that consumption remains healthy. Refining margins have fallen, stockpiles in China have increased, and Asia's largest economy has returned to deflation, leading to growing bearishness in the oil market. The prompt spread for US crude narrowed, indicating reduced concerns about scarcity.
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Oil recovered after plunging to a three-month low on concerns about global consumption.
Brent futures edged back above $80 a barrel, as some technical gauges suggested the slump in prices may be overdone. Markets globally have been looking for clues on whether the Federal Reserve will dial back a higher for longer stance on interest rates, while for oil in recent days the focus has shifted to softness in demand and higher supplies.
Still, on Thursday Saudi Arabia’s energy minister said consumption remains healthy. That echoed remarks from the Secretary General of the Organization of Petroleum Exporting Countries earlier in the week.
Oil prices have tumbled sharply over the past three weeks amid growing concerns over weaker demand. The focus has returned to fundamentals, with refining margins falling and stockpiles swelling in China, the biggest importer. Asia’s largest economy returned to deflation, according to data released Thursday.
“It’s an interesting shift from most of October, when the oil market did not seem overly concerned about the macro picture,” said Anurag Maheshwari, head of oil options at Optiver. “Now we’re in a place where the market is back to paying attention to the supply-demand balance outside of the Middle East.”
The growing bearishness has been reflected in the prompt spread for US crude, where the premium for near-term contracts disappeared on Wednesday. That indicates markets are less concerned about scarcity than they were a few weeks ago.
Source: https://www.bloomberg.com/
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