Oil Holds Near Month’s Low on Demand Concerns and Rampant Dollar
Oil held close to this month’s low, following steep losses in the previous two days, amid a soft demand outlook in China, a stronger US dollar and concerns the market may flip to oversupply.
Brent crude edged higher near $72 a barrel, paring an earlier decline, after shedding 5% over two sessions, while West Texas Intermediate traded below $69. The recent tumble has coincided with marked weakness in the nearest portion of the oil futures curve, pointing to a market that’s softening.
China’s latest measures to kick-start its economy stopped short of direct stimulus, and inflation remains weak. A gauge of the dollar hit a one-year high as investors adjust to Donald Trump’s electoral victory, making crude oil more expensive for most buyers.
Over the last few days crude has lurched lower within the relatively narrow range in which it has traded since the middle of last month. Traders continue to track tensions in the Middle East, the prospects of a second Trump presidency, and OPEC+ decisions on output. The outlook remains weak, with global supply expected to outpace demand next year. OPEC’s monthly market report, due for release later Tuesday, will shed more light on the outlook for balances.
“Sentiment in the oil market remains largely bearish: US dollar strength, demand concerns, and expectations of a loosening oil balance are keeping pressure on prices,” said Warren Patterson, head of commodities strategy at ING Groep NV. “In order to change the outlook for next year, we either have to see OPEC+ delay the return of barrels through much of 2025, or the US enforcing sanctions against Iran effectively.”
Weakness in nearby timespreads that gauge market health has sparked some concerns that oil is already drifting towards oversupply. The nearest WTI contract closed at its smallest premium to the next month since February on Monday, while a gauge of supplies at the key storage hub of Cushing, Oklahoma also traded in a bearish structure.
Brent for January settlement rose 0.6% to $72.25 a barrel at 10:07 a.m. in London.
WTI for December delivery gained 0.6% to $68.46 a barrel.(Cay)
Source : Bloomberg
