Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Oil rally stalls on weak Chinese data, uncertainty over OPEC cut

Published 11/30/2022, 09:28 PM
Updated 11/30/2022, 09:37 PM
© Reuters

By Ambar Warrick Oil prices were muted on Thursday, cutting short a three-day rally after data highlighted growing economic cracks in major crude importer China, while markets also speculated over whether the OPEC’s last meeting for the year will result in a supply cut. 

Chinese manufacturing activity- a bellwether for the economy- weakened substantially in November, official and private surveys showed this week. This largely offset optimism over the country’s scaling back of some COVID-19 curbs in two major cities, following widespread protests. 

Beijing has also given no indication that it plans to scale back the lockdown measures that weighed heavily on China's economy this year, denting its appetite for crude. 

Brent oil futures were steady around $86.83 a barrel, while West Texas Intermediate crude futures were largely unchanged at $80.50 a barrel by 21:14 ET (02:14 GMT). 

Focus is now on an upcoming meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) on Sunday. Markets are split over the cartel's capacity to cut supply further, after it slashed production by 2 million barrels per day in October.

The cartel recently signaled that it would consider recent weakness in oil markets during its upcoming meeting, but gave no direct signals that it will cut production. 

Still, crude prices rallied sharply in recent sessions after data showed U.S. inventories shrank substantially more than expected in the prior week. The reading showed that the U.S. government was now scaling back its drawdowns from the Strategic Petroleum Reserve, which likely heralds tighter oil supply in the world’s largest economy.

But while demand among refiners remained strong, a continued build in gasoline inventories showed that consumer demand for fuel remained weak amid high inflation and rising interest rates.

Weakness in the dollar also benefited oil markets this week, after Federal Reserve Chairman Jerome Powell signaled that the central bank will slow its pace of interest rate hikes in the coming months.

But Powell warned that interest rates will likely peak at higher-than-expected levels if inflation proves to be stubborn. 

The Fed’s Beige Book showed that the U.S. economy is losing momentum, while the outlook is paved with “increased pessimism,” heralding more uncertainty over oil demand in the country. 

The OPEC also recently forecast weakening crude demand in the near-term due to increasing economic uncertainty fueled by rising interest rates and high inflation. 

Latest comments

its build season for inventories and they pretend there is no demand. look at the eia 5yr graph and it will be clear.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.