Oil prices rose on Monday, extending gains for a second session as U.S. efforts to replenish strategic reserves provided some support, but concerns remain about a crude oversupply and a slowdown in fuel demand next year.
Brent crude futures were up 0.6%, or 48 cents, at $76.32 a barrel by 04:06 GMT, while West Texas Intermediate (WTI) crude futures were up 0.5%, or 38 cents, at $71.61 a barrel.
Brent and WTI experienced their longest weekly decline since 2018. Although both contracts rose more than 2% on Friday, they fell for a seventh consecutive week due to ongoing oversupply concerns.
Technical chart indicators of prices are supported by US demand seeking up to 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) for delivery in March 2024.
Although the Organization of the Petroleum Exporting Countries and its allies, commonly known as OPEC+, have pledged to reduce production by 2.2 million barrels per day (bpd) in the first quarter, investors remain skeptical that supply will fall. It seems that the increase in production in non-OPEC countries will lead to a supply surplus next year.
While a stock draw of 700,000 barrels per day is expected in the first half, only 140,000 barrels per day is expected for the whole year. Until the market sees clear data points regarding voluntary production cuts, prices will remain volatile and directionless.
Preliminary clarity on the data will be possible by implementing the cuts in the coming months and monitoring country-level production data after January.
The latest consumer price index data from China, the world’s largest oil importer, showed deflationary pressures are rising as weak domestic demand casts doubt on the country’s economic recovery.
Chinese officials said on Friday they would stimulate domestic demand and consolidate and boost economic recovery in 2024.
This week, investors are awaiting guidance on interest rate policies from meetings of five central banks, including the Federal Reserve, and data on U.S. inflation and their impact on the global economy and oil demand.
