Oil & Fuel update – 13th November

Last Week

Oil prices retreated around 3% on Tuesday, reaching their lowest point since late August. This decline was fuelled by concerns over demand, triggered by mixed Chinese data and a diminishing investor interest in interest rate cuts. China, the world’s largest crude importer, reported a fragile economic recovery with overseas shipments falling 6%, missing expectations, while imports increased by 3% compared to the previous year.

Brent crude futures experienced a decrease, dropping $2.40 to $82.50 per barrel. Similarly, US West Texas Intermediate crude fell, down $2.50 to $78.25 per barrel. On the demand side, China’s crude oil imports in October showed robust growth year on year and month on month. However, total exports contracted more rapidly than anticipated. Expectations of reduced crude runs by Chinese refiners between November and December could further constrain oil demand and contribute to price declines.

The decision of the US Federal Reserve to maintain key overnight interest rates at 5.25-5.50% last week and the strengthening of the US dollar from recent lows have also played a role in making oil more expensive for holders of other currencies. Market attention is focused on whether Saudi Arabia and Russia are willing to voluntarily limit production beyond the year-end, in addition to the existing OPEC producer group deal. The current supply cuts of 1.3 million barrels per day are set to continue until the end of 2023.

While oil prices saw a slight increase on Friday, they are still on track for a third consecutive week of declines. This downward trend is attributed to reduced concerns about supply disruptions related to the Israel-Hamas conflict, bringing attention back to worries about demand.

This Week

Iran has warned that an escalation of tensions between Israel and Hamas is inevitable. This week may witness the unfolding of the Middle East conflict, with many anticipating an intensification of Israeli operations in Gaza City. Heightened activities from Lebanon and Iran could potentially trigger a surge in oil prices, offering limited security.

Foenix Partners, 26 Curtain Road, London, EC2A 3NY