Oil prices slide for 7 straight weeks, longest downtrend since 2018

December 09, 2023 (MLN): Global oil prices have marked their seventh consecutive weekly decline this week, the longest losing streak witnessed in half a decade, driven by concerns about weak demand and excess supply.

The two major benchmarks, Brent Crude and WTI closed the week at $75.9 and $71.36, down by 3.96% and 4.1% respectively.

The closing figures for the week showed that oil prices dropped to their lowest levels since late June 2023 with a decline of over 20% since the beginning of their seven-week downturn.

The week started with the market extending its uncertainty over the depth and duration of OPEC+ output cuts.

To recall, the OPEC+ oil producers last week agreed to voluntary output cuts which totaled 2.2 million barrels per day for early next year.

However, the market took a negative turn as producers did not announce any new group cut target for 2024. Market participants were strongly anticipating new measures from producers to support the downward trajectory of the commodity.

Brent Crude Weekly Time Frame Chart

Further pressure exerted on prices after the U.S. Energy Information Administration (EIA) shared its latest data on crude inventories which revealed a 5.4 million barrels increase in the total motor gasoline inventories compared to previous week, higher than what analyst predicted.

Conversely, other side of the data disclosed that the  U.S. crude inventories dropped unexpectedly by 4.6m barrels during the week, providing some support to prices.

However, concerns over demand escalated further when the credit rating agency Moody's downgraded its outlook on China's government credit ratings to negative from stable.

The cut was attributed to lower medium-term economic growth and ongoing downsizing of the property sector.

Furthermore, China's customs data revealed a 9% year-on-year decline in oil imports in November, attributed to weak economic indicators.

Sluggish demand in China and US, the top oil producers kept investors worried and oil prices continued to decline.

In a prompt to support prices, Saudi Arabia and Russia, the world’s biggest oil exporters called on OPEC+ members to join an agreement on output cuts.

Going forward, positive momentum entered the market on Friday after the U.S. Bureau of Labor Statistics showed a stronger than expected job growth, as the non-farm payrolls (NFP) added a robust 199,000 jobs and the unemployment rate for the month of November edged down to 3.7%.

These figures supported expectations of demand growth and strengthened the U.S. Dollar.

Accordingly, the U.S. Dollar Index (DXY), which tracks the value of the greenback against six other top currencies rebounded by 0.77% WoW after experiencing three straight weekly declines.

A stronger dollar makes oil more expensive for holders of other currencies, exerting a negative impact on prices.

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