Oil prices fell in early trading on Thursday, reversing most of the previous session’s gains, weighed down by concerns about higher global production amid slower demand growth. The impact of the strong dollar is also undeniable.
Brent crude futures were down 35 cents, or 0.5%, at $71.93 a barrel by 0400 GMT. WTI crude futures were down 42 cents, or 0.6%, at $68.01.
Oil is struggling with OPEC’s narrative of weak demand forecasts, which has delayed additional production for another month amid concerns about the negative impact on prices.
On Tuesday, OPEC cut its global oil demand growth forecast to 1.82 million bpd in 2024 from last month’s forecast of 1.93 million bpd, citing weak demand in China, India, and other regions, sending oil prices to their lowest level in nearly two weeks.
Meanwhile, the U.S. Energy Information Administration (EIA) slightly raised its expectation that U.S. oil production will rise to an average of 13.23 million bpd this year, 300,000 bpd higher than last year’s record of 12.93 million bpd and slightly higher than its previous estimate of 13.22 million bpd.
The agency also raised its global oil production forecast 2024 to 102.6 million bpd from its previous estimate of 102.5 million bpd. Next year, it expects world production to be 104.7 million bpd, up from 104.5 million bpd.
The EIA’s oil demand growth forecast is weaker than OPEC’s forecast, at around 1 million bpd in 2024, but higher than its previous estimate of around 900,000 bpd.
Market participants now await the International Energy Agency’s (IEA) oil market report due later in the day, as well as the EIA’s U.S. crude and product inventory data.
Analysts say concerns about Chinese demand continue to contribute significantly to softening prices.
Despite various stimulus measures implemented by Chinese authorities, there has been no improvement in economic activity or market sentiment in mainland China.
Also weighing on prices was the U.S. dollar rising to near a seven-month high against major currencies on Wednesday. The data showed U.S. inflation in October rose in line with expectations and the Federal Reserve will continue to cut interest rates.
The strengthening US dollar is creating strong headwinds for commodities, making commodities priced in USD expensive for buyers using other currencies.
