Staying close to six-month lows, oil prices

Staying close to six-month lows, oil prices

Through Robert Harvey

December 13, 2023

                                                            Source reuters.com

December 13, London (Reuters) - Following a more than 3% decline in the previous session, oil prices stabilized on Wednesday but were close to six-month lows as investors expressed concern over oversupply and declining demand.

At 1437 GMT, February's Brent crude futures were up 15 cents, or 0.2%, at $73.39 per barrel. The January contract price for U.S. West Texas Intermediate crude increased by 18 cents, or 0.26%, to $68.79 a barrel.

Tuesday saw Brent futures close at $73.24 a barrel, the lowest level since late June. This resulted in a $2.79 per barrel daily loss. Wednesday saw Brent futures hit a new six-month low of $72.29 per barrel at their intraday low.

"Concerns around the global economy next year, a weak commitment to output cuts from OPEC+ and higher output elsewhere, including record levels in the United States, is weighing heavily on prices into year-end," Craig Erlam, an analyst at OANDA, said.

OPEC attributed the recent decline in crude prices to "exaggerated concerns" regarding the growth in oil demand in its most recent monthly report on the oil market.

The Organization of Petroleum Producing Countries maintained its estimate of 2.25 million barrels per day (bpd) of growth in global oil demand for 2024.

Investors will be watching the U.S. Federal Reserve's policy announcement later on Wednesday, as it is widely anticipated that interest rates will remain unchanged for a third consecutive meeting.

According to IG's market strategist Yeap Jun Rong, "aggressive rate cuts" have been priced into the market until 2024. Oil prices could drop as a result of "any disappointment on that front, which could strengthen the U.S. dollar and weigh on the risk environment," according to Yeap.

At the COP28 summit on Wednesday, almost 200 countries came to a historic agreement to start cutting back on the world's use of fossil fuels. This move was made to send a message to investors in oil and other fossil fuels.

The energy minister of Saudi Arabia stated that the final agreement was in agreement with the COP28 president and that it would not have an impact on the Kingdom's exports of hydrocarbons.

After the United Nations passed a resolution requesting a ceasefire and U.S. President Joe Biden cautioned that Israel was beginning to lose support due to civilian deaths, Israel declared it will continue its war in Gaza regardless of international support.

Robert Harvey reported from London and Colleen Howe from Beijing; Mark Potter and Kirsten Donovan handled the editing.

Source reuters.com