Oil prices fell on Tuesday, losing most of Monday’s gains, as mixed economic data from China, the world’s second-largest oil consumer, and winter demand concerns offset the impact of Saudi Arabia and Russia extending production cuts.
Brent crude futures were down 47 cents, or 0.55%, at $84.71 a barrel as of 04:31 GMT, while West Texas Intermediate (WTI) crude traded 37 cents, or 0.46% less, at $80.45 a barrel.
Both benchmarks rose about 30 cents on Monday after top exporting countries Saudi Arabia and Russia reaffirmed their commitments to voluntary oil supply cuts by the end of the year.
While China’s crude oil imports showed strong growth on both an annual and monthly basis in October, the country’s total exports contracted faster than expected. However, while China’s export data appears to be worse than expected, demand appears to be recovering. The weak trend in exports reflects the downward pressure on the global economy in the fourth quarter.
Expectations that China-based refiners will reduce crude oil flows between November and December could limit oil demand and exacerbate price declines.
Extending these production cuts means markets are still wary of demand-triggered factors and could put further pressure on prices.
Given the limited impact of the Israel-Hamas war on oil supplies, the production cuts suggest Saudi Arabia is still concerned about demand.
This year’s winter in the northern hemisphere passes relatively warm, which reduced fuel consumption to some extent. Concerns that a warmer-than-expected winter could limit energy and fuel demand also put pressure on prices.
Markets are watching how long Saudi Arabia and Russia will continue to rein in production and whether they will extend these cuts into early 2024 or start restoring that production. This issue is expected to become clear at the beginning of December.
Saudi Arabia confirmed on Sunday it would continue with an additional voluntary cut of 1 million barrels per day (bpd), meaning production of around 9 million bpd for December, an Energy Ministry source said.
Moscow announced that it will maintain an additional voluntary supply cut of 300,000 barrels per day in exports of crude oil and petroleum products until the end of December.