Oil prices drop due to doubts about OPEC+ reduction and worries about China

6 Dec 2023 , 10:07 AM

As markets continued to doubt the impact of OPEC+ cutbacks and took cues from a weakening demand picture in China, oil prices fell in Wednesday morning Asian trading.

Futures for Brent crude dropped 8 cents, or 0.1%, to $77.12 a barrel. At $72.19 a barrel, U.S. WTI crude futures were down 0.2%, or 13 cents.

In the previous session, both benchmarks closed at their lowest points since July 6. WTI saw drops for four days in a row.

Due to doubts over whether the 2.2 million barrels per day (bpd) of voluntary output cuts that the Organisation of the Petroleum Exporting Countries (OPEC+) and its allies, including Russia, agreed to for the first quarter of 2024, the cutbacks have not been able to boost market sentiment.

The voluntary 1.3 million bpd reductions from Saudi Arabia and Russia are included in the cuts.

Market sentiment was not greatly affected by remarks made by Russian Deputy Prime Minister Alexander Novak, who stated that OPEC+ was ‘ready to take additional actions to eliminate speculation and volatility.’

Vladimir Putin, the president of Russia, is scheduled to visit Saudi Arabia and the United Arab Emirates on Wednesday. The agenda of the talks is expected to include discussions about cooperation in the oil market.

Fears regarding the state of China’s economy have also contributed to the bearish sentiment.

The outlook for China’s A1 rating was downgraded from stable to negative by rating agency Moody’s on Tuesday due to ‘increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector’.

On Thursday, China will make public preliminary trade data, which will include data on imports of crude oil.

According to market sources citing American Petroleum Institute data on Tuesday, crude oil and fuel stockpiles increased in the United States in the week ending December 1.

According to the sources, who wished to remain anonymous, crude stocks rose by 594,000 barrels. While distillate inventories increased by about 1.9 million barrels, petrol stockpiles increased by 2.8 million barrels.

The US government’s inventory report is expected on Wednesday.

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