Oil prices tumble amidst surging US production, China demand worries

November 16, 2023 (MLN): Global oil prices continued their downward slide on Thursday as record production in the United States signaled high supply, coupled with concerns about demand from China.

Brent crude is currently trading at $80.38 per barrel, down by 0.63% on the day.

While West Texas Intermediate crude (WTI) is trading at $76.06 per barrel, down by 0.69% on the day.

This marks the third consecutive loss in oil prices driven by higher supply and uncertain demand outlook.

WTI's front-month contract also traded below the price for the second month, a structure known as contango, suggesting that investors expect prices to increase. The front month's discount to the second month traded at minus 13 cents on Thursday, as Reuters reported.

"Concerns over a record-high U.S. production rate put fresh pressure on oil prices, adding to an already worrisome demand outlook," said Tina Teng, a markets analyst at CMC Markets in Auckland.

U.S. crude stocks rose by 3.6 million barrels last week to 421.9 million barrels, according to the U.S. Energy Information Administration (EIA), far exceeding analysts' expectations.

U.S. crude production held steady at a record 13.2m barrels per day (bpd).

In Asia, China's oil refinery throughput eased in October from the previous month's highs as industrial fuel demand weakened and refining margins narrowed.

Still, its economic activity perked up in October as industrial output increased at a faster pace and retail sales growth beat expectations.

Data released on Thursday morning underscored concerns around China's property sector, showing that new home prices fell for a fourth consecutive month in October, with property sales by floor area down 20.33% year-on-year.

Technical factors were also restraining any upward movement in prices, said Jun Rong Yeap, a market strategist at IG in Singapore.

"Given that the tighter oil supply-demand dynamics have been less prominent from months ago, there has been some unwinding in previous bullish positioning ever since, with prices falling back below their 200-day moving average as a sign of sellers in control," Yeap said.

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