Oil prices decline as supply cuts are less likely than demand concerns

21 Nov 2023 , 09:50 AM

Tuesday saw a retreat in oil futures, undoing the gains of the previous day, as worries about dwindling demand due to a slowing world economy outweighed the possibility of further supply curbs by OPEC and its allies, including Russia.

Brent crude futures had down 19 cents, or 0.2%, to $82.13 per barrel, while U.S. West Texas Intermediate crude had dropped 15 cents, or 0.2%, to $77.68 per barrel.

Both contracts saw a 2% increase on Monday after three OPEC+ sources informed Reuters that the Organisation of the Petroleum Exporting Countries (OPEC) and its allies will be meeting on November 26 to discuss whether to further reduce oil supplies.

Since late September, the oil market has fallen over 20% as record highs in U.S. crude output have been maintained. The market was worried about growing demand, particularly from China, which is the world’s largest oil importer.

In addition, traders were keeping an eye out for indicators of demand depletion stemming from a potential 2024 U.S. recession and taking into account Walmart’s, the country’s biggest retailer, warning last week about potential deflation.

According to a preliminary Reuters poll released on Monday, U.S. inventories of distillates were expected to be declining, while inventories of crude and petrol were likely rising last week. The Energy Information Administration is due on Wednesday, while the American Petroleum Institute is due later on Tuesday.

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