Oil plunges 3% to lowest since July on demand concerns

Oil prices fell more than 3% on Tuesday to their lowest since late July, as traders eyed mixed Chinese economic data, rising geopolitical tensions and oil cartel Opec’s export changes.

Brent crude futures fell $2.95, or 3.5%, to $82.23 a barrel while US West Texas Intermediate crude fell to $77.94 a barrel, down $2.88, or 3.6%.

Both contracts hit their lowest levels since July 24, with Brent set to close below $84 a barrel for the first time since Hamas’ October 7 attack on Israel. The attack and Israel’s declaration of war had raised fears a wider conflict may affect Middle East oil supplies.

“Traders will remain on high alert for signs of a wider conflict emerging in the region that could disrupt supplies, but it seems those fears are subsiding,” Oanda analyst Craig Erlam said.

A recovery in oil exports from the Oped also added to the pressure on oil prices, UBS analyst Giovanni Staunovo said.

“Opec crude exports are up by about 1-million barrels per day (bpd) since their August low, as a result of seasonally lower domestic demand in the Middle East. It seems it is too much supply to be absorbed by oil consuming nations,” Staunovo said.

The premium on front-month loading Brent contracts over ones loading in six months was at a two-and-a-half month low, indicating less concern about supply deficits.

China’s crude oil imports in October showed robust growth, but its total exports of goods and services contracted at a quicker pace than expected.

“The data signals the continued decline in the Chinese economic outlook driven by deteriorating demand in the country’s largest export destination: the West,” City Index analyst Fiona Cincotta said.

The US Energy Information Administration now expects total petroleum consumption in the country to fall by 300,000 bpd this year, reversing its earlier forecast of a 100,000 bpd increase.

Fading investor hopes for a peak in global interest rates also helped lift the US dollar from recent lows, making oil more expensive for holders of other currencies.

The Federal Reserve may have to do more to reduce inflation to its 2% target, Minneapolis Federal Reserve president Neel Kashkari said. Investors are awaiting comments from Fed Chair Jerome Powell, due on Wednesday and Thursday.

Update: November 7 2023
This story has been updated with the latest oil price and new comments. 

Reuters