US’s peak production pushes oil prices down

London — Oil prices dipped on Wednesday amid signs the US, the world's biggest oil producer, is at peak production, offsetting positive crude demand signals from top consumer China.

Brent futures were down 34c to $82.13 a barrel at 9.49am GMT, while US West Texas Intermediate (WTI) crude was down 40c to $77.86.

China’s economic activity perked up in October as industrial output increased at a faster pace and retail sales growth beat expectations, an encouraging sign for the world's second-largest economy.

The International Energy Agency joined Opec+ in raising oil demand growth forecasts for 2023, despite projections of slower economic growth in many major countries.

“With China being a scapegoat for much of the world’s lack of industrial demand, this glimmer of light ought to aid oil’s progress but the reluctance is so far winning out,” said John Evans of oil broker PVM in a note.

Downward pressure on oil prices may come from the supply side, with the US “likely at peak production for crude,” while the delayed release of oil data from the world's biggest producer makes the investment situation more opaque, Evans said.

The US Energy Information Administration (EIA) will release its first oil inventory report in two weeks on Wednesday, after a delay last week due to a systems upgrade.

The Financial Times reported on Wednesday that Denmark will be tasked with inspecting and potentially blocking Russian oil tankers sailing through its waters under new EU plans, as the West explores more ways of enforcing a price cap on Moscow's crude.

However, it is still to be seen how Denmark will enforce this.

A softer US inflation reading that bolstered expectations for an interest-rate cut by the Federal Reserve next spring sent the US dollar down to a two-and-a-half-month low against a basket of other currencies. A weaker dollar can boost oil demand by making crude cheaper for buyers using other currencies.

UK inflation also cooled in October, and more than expected, reinforcing expectations that the Bank of England’s hiking cycle has ended, with the Federal Reserve and ECB also seemingly having reached the peak for interest rates.

Elsewhere, the EU reached a deal on Wednesday on a law to place methane emissions limits on Europe’s oil and gas imports from 2030, pressuring international suppliers to clamp down on leaks of the potent greenhouse gas. 

Reuters