September 07, 2023 (MLN): Oil prices dipped slightly on Thursday, driven by concerns about reduced demand during the winter season and China's uncertain economic outlook.
These factors overshadowed the anticipation of tighter supplies resulting from extended production cuts in Saudi Arabia and Russia.
Brent crude is currently trading at $90.39 per barrel, down by 0.23% on the day.
While West Texas Intermediate crude (WTI) is trading at $87.31 per barrel, down by 0.26% on the day.
Both benchmarks experienced a surge earlier in the week amid the extension of the voluntary supply cuts by the world's leading oil exporters, Saudi Arabia and Russia,until the end of the year.
These additional cuts complemented the measures established in April by various OPEC+ producers, which are set to continue until the conclusion of 2024.
"At present, it is really difficult for us to see any negative factors due to supply constraints. However, we need to consider possible demand risks such as in the fourth quarter, the market could slow into an off peak season for oil consumption after summer demand ends," said CMC Markets' Shanghai-based analyst Leon Li, as Reuters reported.
Market participants also digested mixed data from China. Overall exports fell 8.8% in August year on year and imports contracted 7.3%. But crude imports surged 30.9%.
Li said there were some encouraging signs for the Chinese economy. The extent of declines in trade data was less than expected and the Chinese government has also introduced a series of policy steps to boost financial and real estate markets.
However, it is still too early to judge the pace of China's demand recovery, although it should have improved from July, he added.
Concerns about rising oil output from Iran and Venezuela, which could balance out a portion on cuts from Saudi and Russia, kept a lid on the market as well.
"OPEC+ action is being partially undermined by the return of sanctioned barrels from Iran. Iranian crude production has ranged higher in the year-to-date, reaching 2.83 million barrels per day (bpd) in July, up from 2.55 million bpd in January," said BMI research analysts in a report.
"We also note upside risk to our Venezuelan production forecast, with U.S. officials reportedly drafting proposals to ease sanctions if Caracas progresses plans to hold new presidential elections," they added.
Helping support prices, U.S. crude oil inventories were projected to have fallen by 5.5 million barrels in the week ending September 01, according to market sources citing American Petroleum Institute figures.
Official inventory data from the U.S. Energy Information Administration is due at 08:00 pm PST today.
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Posted on: 2023-09-07T12:26:39+05:00
