- The prospect of additional global interest rate increases could heighten oil demand worries.
- China lost more steam as retail sales decreased and industry output stagnated.
- The International Energy Agency forecast that Chinese oil demand will increase next year.
Thursday saw a decline in oil prices as the dollar strengthened. The prospect of additional interest rate increases from international central banks also heightened demand worries. Oil demand declines when prices rise for individuals using other currencies due to a stronger dollar.
Even as the economy veers into a potential recession, Federal Reserve Chair Jerome Powell stated on Wednesday that the US central bank would increase interest rates further next year.
According to Tina Teng, an analyst at CMC Markets, oil prices are under pressure today. The Fed’s aggressive outlook for its monetary policy generated renewed fears about economic growth, raising the US currency and pushing commodities prices down.
The demand forecast was further clouded by the fact that Chinese economic indicators for November were “far weaker than projected,” Teng continued.
The second-largest economy in the world lost more steam as retail sales continued to decrease and industry output stagnated. Both readings missed estimates and recorded their lowest levels in six months amid an increase in COVID-19 cases.
A week after an oil leak in rural Kansas that resulted in the closing of the whole Keystone pipeline, Canada’s TC Energy Corp announced it is restarting operations in a part of the pipeline, adding to the pressure on oil prices.
The Energy Information Administration (EIA) said that US crude oil stockpiles increased by over 10 million barrels last week, the largest since March 2021.
Distillate stockpiles increased by 1.4 million barrels to 120.2 million barrels, while gasoline stocks rose by 4.5 million to 223.6 million barrels over the week.
According to Citi analysts, “Commercial crude oil stockpiles climbed as refineries reduced their runs.”
According to the analysts, stockpiles of refined goods increased significantly as net exports of these products increased, and end-user demand continued to decline due to the high price of energy.
The International Energy Agency’s forecasts, which predict that Chinese oil demand will increase next year after declining by 400,000 barrels per day this year, put a cap on price reductions.
According to the International Energy Agency (IEA), as China emerges from its COVID-related economic slump, global oil demand growth will moderate but remain strong next year at 1.7%.