Oil Steady After Drop With China Outlook, Demand in Focus
Oil steadied after its biggest one-day drop in almost two weeks as a weak outlook in top importer China continued to weigh on the market.
Brent crude traded below $74 a barrel after falling 2.3% on Friday, while West Texas Intermediate neared $70. Data over the weekend showed China’s consumer inflation sluggish in October, while factory-gate prices fell again. That came after Beijing unveiled a debt swap plan on Friday to bolster the economy but stopped short of delivering new stimulus.
Crude traders have been assessing the outlook for global demand heading into 2025, as well as implications stemming from Donald Trump’s election to the White House and tensions between Israel and Iran. With a surplus widely expected next year, investors will get a slew of influential outlooks this week, starting with the outlook from OPEC on Tuesday. “The crude market has come to a fair value and feels very comfortable at $70,” said Chris Weston, head of research at Pepperstone Group. “We do have the risk of the U.S. election that could affect growth expectations, but we don’t expect that battle to bite and affect this week.
The time frame suggests that physical market strength is waning. While Brent’s prompt spread — the difference between its two nearest contracts — remains in a bullish and backwardated structure, the difference has narrowed. It is 27 cents a barrel in backwardation, compared with 44 cents a month ago.
After the outlook from the Organization of the Petroleum Exporting Countries, the U.S. Energy Information Administration will issue its short-term outlook on Wednesday, followed by the International Energy Agency the following day. In its latest snapshot, OPEC lowered its demand forecast.
Source: Bloomberg
