Oil prices post loss as demand concerns continue

Prices dropped as much as $1 a barrel after US data showed that new manufacturing orders declined

Since November 30, when the Opec+ alliance of oil-producing countries announced voluntary production cuts of 2.2 million barrels a day for the first quarter of 2024, oil prices have fallen by 13 per cent. Reuters
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Oil prices ended lower on Friday after an up-and-down trading session, as investors continue to weigh demand concerns and the extended output cuts from Opec+ members.

Brent, the global benchmark for two thirds of the world's oil, inched down 0.08 per cent to settle at $76.55 a barrel. West Texas Intermediate, the gauge that tracks US crude, shed 0.21 per cent at finish at $71.43 a barrel.

Earlier in the session, prices dropped as much as $1 after US data showed that new manufacturing orders declined, which is interpreted as a signal that demand in the world's biggest user of crude could weaken in 2024.

Prices fell to a six-month low on Tuesday, with Brent settling 3.67 per cent down at $73.24 a barrel, the lowest since July, while WTI closed down 3.8 per cent at $68.61 a barrel.

“The markets in general and oil in particular are trying to sort out what's going on. Everyone's trying to feel their way,” said John Kilduff, a partner at New York-based advisory firm Again Capital.

US inflation eased in November but was higher than market expectations, cooling any hopes that the US Federal Reserve would cut interest rates early next year.

The Consumer Price Index rose 0.1 per cent last month, the Labour Department reported on Tuesday. On an annual basis, inflation rose 3.1 per cent, down from 3.2 per cent in October.

Petrol costs, which declined by 6 per cent, contributed to last month's slowdown, the Labour Department said.

The US Federal Reserve left interest rates unchanged on Wednesday after its last policy meeting of the year.

The dollar also fell to a four-month low on Thursday after Fed chairman Jerome Powell's comments, which signalled lower borrowing costs coming in 2024. A weaker greenback makes dollar-denominated oil cheaper for foreign buyers.

Since November 30, when the Opec+ alliance of oil-producing countries announced voluntary production cuts of 2.2 million barrels per day for the first quarter of 2024, oil prices have fallen by about 13 per cent.

Saudi Arabia, the world's largest oil exporter, will keep its voluntary output cut of one million barrels a day until the end of March. The UAE and Russia will also deepen their crude production cuts.

In total, the group revealed supply reductions of almost 2.2 million bpd for the first quarter.

The slide in oil prices is partly due to mounting fears that producers would not comply with the supply cuts, UBS strategist Giovanni Staunovo had said.

Also this week, the US Energy Information Administration in its latest short-term energy outlook report raised its forecast for supply this year by 300,000 bpd to 12.93 million bpd from its previous report.

Updated: December 16, 2023, 10:45 AM