Oil prices slide as China's economic data dims OPEC's output cut glow

November 07, 2023 (MLN): Global oil prices fell on Tuesday following mixed signals in China's latest economic data, which overshadowed the positive impact of Saudi Arabia and Russia extending their output cuts.

Brent crude is currently trading at $84.42 per barrel, down by 0.70% on the day.

While West Texas Intermediate crude (WTI) is trading at $80.11 per barrel, down by 0.73% on the day.

Both benchmarks gained about 30 cents on Monday after top exporters Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year.

While China's crude oil imports showed robust growth both year on year and month on month in October, the country's total exports still contracted at a quicker pace than expected, as Reuters reported.

"China's export data could be seen to be worse than expected, but domestic demand may be picking up," said CMC Markets' Shanghai-based analyst Leon Li.

The weak trend in exports reflects downward pressure on the global economy that emerged in the fourth quarter, he added.

Expectations of crude run reductions by China-based refiners between November and December may limit oil demand and exacerbate price declines.

Some analysts also say that the extension of these output cuts mean markets are still cautious on demand drivers, which may put further pressure on prices.

"The production curbs, in light of the limited impact on oil supply of the Israel-Hamas war, suggests they (Saudi Arabia) are still concerned about demand," said ANZ analysts in a note.

Concerns that a warmer-than-expected winter could curb energy and fuel demand weighed on prices as well.

"This year's winter in the northern hemisphere is relatively warm, which has reduced fuel consumption to a certain extent," said CMC Markets' Li.

Looking ahead on the supply side, markets are waiting to see how long Saudi Arabia and Russia are ready to rein in production.

"What will be of more interest to the market is whether they will extend these cuts into early 2024 or start to bring this output back. We should get clarity on this sometime in early December," ING analysts added.

Saudi Arabia confirmed on Sunday it would continue with its additional voluntary cut of 1 million barrels per day (bpd) translating into production of about 9 million bpd for December, a source at the Ministry of energy said in a statement.

Moscow also announced it would continue its additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.

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