Crude Oil Dips as Markets Weigh Chinese Demand

March 9, 2024
Crude Oil Production

By Adedapo Adesanya

Crude oil dipped by 1 per cent on Friday as markets remained wary of Chinese demand even as the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) extended supply cuts.

Yesterday, the price of Brent crude futures was down by 94 cents or 1.1 per cent to $82 a barrel, and the US West Texas Intermediate (WTI) crude futures declined by $1.02 or 1.3 per cent to trade at $77.92 per barrel.

Both benchmarks were on track for weekly declines, with Brent down 1.1 per cent and WTI 2.6 per cent.

Market analysts noted that while supplies have remained on the tighter side given OPEC’s production cuts and Russian sanctions slowing exports, demand from China appears to be lagging.

This is happening as the US driving season demand has yet to kick in.

The market also overlooked US job growth which rose by 275,000 new nonfarm payrolls in February, according to the US Bureau of Labor Statistics.

However, the country’s unemployment rate also rose and wage growth decelerated, indicating that the US economy could be slowing.

If this happens, it could delay the much-anticipated interest rate cut expected in June from the US Federal Reserve.

Markets have reacted to signals on the timing of possible rate cuts in the US and European Union (EU) in the previous two sessions.

US Federal Reserve Chairman, Mr Jerome Powell, said on Thursday that the central bank was not far from gaining enough confidence that inflation is falling sufficiently to begin cutting interest rates. The European Central Bank (ECB) could also start cutting rates from next month.

Lower interest rates could increase oil demand by boosting economic growth.

Meanwhile, China, this week, has set an economic growth target for 2024 of around 5 per cent, which many analysts say is ambitious without much more stimulus.

OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.

However, preliminary data showed that crude production in OPEC+ countries increased by 212,000 barrels per day in February over January output.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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