Gains on the US strategic reserve purchase are extended by oil

11 Dec 2023 , 09:36 AM

On Monday, oil prices continued their upward trend from the previous session, partly supported by US efforts to restock strategic stockpiles. However, worries about an excess of petroleum and slower-than-expected growth in fuel consumption in the coming year persisted.

Brent crude futures had increased by 11 cents, or 0.2%, to $75.95 per barrel, while U.S. West Texas Intermediate crude futures had increased by 7 cents, or 0.1%, to $71.30 per barrel.

On Friday, both contracts saw gains of over 2%; however, they fell for the seventh week in a row, which is the longest run of weekly losses since 2018, due to persistent concerns over oversupply.

The United States has requested up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR), with delivery scheduled for March 2024, as a result of the current price downturn.

Investors are still sceptical that supply will decline, even though the Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, committed to reducing output by 2.2 million barrels per day (bpd) in the first quarter. This is because output growth in non-OPEC nations is anticipated to result in excess supply in the following year.

The world’s largest oil importer, China, recently released consumer price index data that indicated growing deflationary pressures as sluggish domestic demand raised doubts about the economy’s ability to rebound.

On Friday, Chinese leaders made a commitment to boost domestic demand, strengthen the economic recovery, and consolidate it by 2024.

Investors are keeping a close eye on data on U.S. inflation and recommendations on interest rate plans from meetings at five central banks, including the Federal Reserve, to see how they could affect the demand for oil and the global economy.

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