Oil rebounded after a torrid run but remained on course for the longest weekly losing streak since 2018 on concerns about a global glut, with traders doubtful that deeper supply cuts by Opec+ will be effective.
Global benchmark Brent, which rose toward $76 a barrel, is still headed for a seventh weekly drop. West Texas Intermediate approached $71 a barrel after retreating by 11 percent over the past six sessions. Widely watched timespreads are mired in bearish contango structures through to the middle of next year, with prompt contracts trading at a discount to later-dated ones.
Crude has closed every session lower since last week’s meeting between the Organization of Petroleum Exporting Countries and its allies as the group’s plans for deeper cuts were met with skepticism. The slump has come even after leading producer Saudi Arabia said the curbs could be extended beyond March, followed by similar remarks from Russia, Algeria and Kuwait.
There are also concerns about the trajectory of demand. Chinese consumption is expected to grow by 500,000 barrels a day next year, according to a Bloomberg survey, less than a third of the increase seen in 2023. In the US, meanwhile, many economists see a recession starting next year.
“The oil demand outlook remains bleak,” said Ravindra Rao, head of commodity research at Kotak Securities Ltd. in Mumbai. “China’s recovery failed to gain traction, while Western factory activity continues to be in contraction.”
The prolonged retreat in oil—as well as declines in related products such as gasoline—will be a boon for central bankers as they seek to rein in inflation. Average retail motor fuel prices in the US have collapsed to the lowest in a year, according to data from the American Automobile Association.
While Opec+ has been reducing supplies in an attempt to rebalance the market and support prices, production from drillers outside the cartel has been expanding. Official data show US supply running at more than 13 million barrels a day, up from about 12 million at the start of the year.