Investor disappointment over China’s latest stimulus plan and oversupply concerns weigh on the market
12 November 2024 - 09:22
byColleen Howe and Emily Chow
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Beijing — Oil prices eased on Tuesday as investor disappointment over China’s latest stimulus plan and oversupply concerns weighed on the market, along with a stronger dollar.
Brent crude futures fell 17c, or 0.2%, to $71.66 a barrel, by 5.50am GMT. US West Texas Intermediate (WTI) crude futures were at $67.84 a barrel, down 20c, or 0.3%.
Both contracts had fallen by more than 5% over the previous two trading sessions.
China unveiled a 10-trillion yuan ($1.4-trillion) debt package on Friday to ease local government financing strains, as the world’s biggest oil importer faces fresh pressure from the re-election of Donald Trump as US president.
But analysts said it fell short of the amount of stimulus that would be needed to boost growth.
While crude oil prices extended losses on a stronger dollar, concerns also emerged over demand in China, ANZ Research analysts said in a note.
“Data released over the weekend showed anaemic consumer inflation in October and another decline in factory gate prices,” they said.
The market was now looking ahead to the release of monthly oil market reports from Opec, the International Energy Agency and the Energy Information Administration, the analysts said.
“Any further downgrades on demand, particularly from Opec, could weigh on sentiment.”
Oil cartel Opec monthly report is set to be released later on Tuesday.
The market will be looking out for further downward revisions in demand from the group’s outlook through 2025, which would add to downward pressure on prices.
“We think Opec+ will be forced to keep delaying the decision to roll back their voluntary cuts. This decision will still result in surplus pressures building,” said Vivek Dhar, an analyst with Commonwealth Bank of Australia.
“The key risk to our outlook is that Opec+ look to unwind their voluntary supply cuts from January, thereby exacerbating oversupply pressures,” he said.
“Any hint that Opec+ are opting to defend market share over targeting higher oil prices has the potential to see oil prices tumble.”
The dollar held around four-month highs on Tuesday, as it is expected to benefit from policies that are likely to keep US interest rates relatively higher for longer.
Markets are also bracing for further signals from US inflation data and Federal Reserve speakers this week.
A stronger dollar makes commodities denominated in the US currency, such as oil, more expensive for holders of other currencies, and tends to weigh on prices.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil loses ground on worry about Chinese stimulus
Investor disappointment over China’s latest stimulus plan and oversupply concerns weigh on the market
Beijing — Oil prices eased on Tuesday as investor disappointment over China’s latest stimulus plan and oversupply concerns weighed on the market, along with a stronger dollar.
Brent crude futures fell 17c, or 0.2%, to $71.66 a barrel, by 5.50am GMT. US West Texas Intermediate (WTI) crude futures were at $67.84 a barrel, down 20c, or 0.3%.
Both contracts had fallen by more than 5% over the previous two trading sessions.
China unveiled a 10-trillion yuan ($1.4-trillion) debt package on Friday to ease local government financing strains, as the world’s biggest oil importer faces fresh pressure from the re-election of Donald Trump as US president.
But analysts said it fell short of the amount of stimulus that would be needed to boost growth.
While crude oil prices extended losses on a stronger dollar, concerns also emerged over demand in China, ANZ Research analysts said in a note.
“Data released over the weekend showed anaemic consumer inflation in October and another decline in factory gate prices,” they said.
The market was now looking ahead to the release of monthly oil market reports from Opec, the International Energy Agency and the Energy Information Administration, the analysts said.
“Any further downgrades on demand, particularly from Opec, could weigh on sentiment.”
Oil cartel Opec monthly report is set to be released later on Tuesday.
The market will be looking out for further downward revisions in demand from the group’s outlook through 2025, which would add to downward pressure on prices.
“We think Opec+ will be forced to keep delaying the decision to roll back their voluntary cuts. This decision will still result in surplus pressures building,” said Vivek Dhar, an analyst with Commonwealth Bank of Australia.
“The key risk to our outlook is that Opec+ look to unwind their voluntary supply cuts from January, thereby exacerbating oversupply pressures,” he said.
“Any hint that Opec+ are opting to defend market share over targeting higher oil prices has the potential to see oil prices tumble.”
The dollar held around four-month highs on Tuesday, as it is expected to benefit from policies that are likely to keep US interest rates relatively higher for longer.
Markets are also bracing for further signals from US inflation data and Federal Reserve speakers this week.
A stronger dollar makes commodities denominated in the US currency, such as oil, more expensive for holders of other currencies, and tends to weigh on prices.
Reuters
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