Oil Prices Decline Over 2%: Oil prices saw a notable drop of more than 2% on Monday after China's latest economic stimulus plan failed to meet investor expectations for boosting demand. China, as the world’s second-largest oil consumer, plays a significant role in global demand trends, and the tepid response to the stimulus added to the downward pressure. Brent crude futures settled at $71.83 per barrel, down by $2.04 or 2.76%, while U.S. West Texas Intermediate crude finished at $68.04 per barrel, marking a decrease of $2.34 or 3.32%.
Impact of Trump’s Election Victory on Oil: Market Phil Flynn, a senior analyst with Price Futures Group, noted that the market is still absorbing the effects of Donald Trump’s U.S. election win. Trump's pro-drilling stance and campaign promise to “drill, baby, drill” have reduced market incentives to go long on oil, Flynn said, suggesting potential long-term shifts in U.S. oil policies could influence market dynamics.
Strong Dollar Adds Pressure on Oil Prices: The U.S. dollar index, which compares the dollar to a basket of foreign currencies, slightly surpassed the levels reached post-election. A stronger dollar typically raises the cost of U.S.-denominated commodities like oil for foreign buyers, exerting further downward pressure on prices as global buyers face higher expenses.
Chinese Economic Data Signals Slowdown: New data from China highlighted a sluggish economic outlook, with consumer prices rising at their slowest rate in four months in October. Additionally, producer price deflation worsened, signaling continued weakness in industrial demand. Analyst Achilleas Georgolopoulos noted that the market remains concerned about deflationary trends, particularly as the producer price index continued its decline, casting doubt on China’s economic momentum.
Supply Forecast to Increase in 2025: According to a recent note by Bank of America Securities, non-OPEC crude oil supply is projected to grow by 1.4 million barrels per day (bpd) in 2025 and by an additional 900,000 bpd in 2026. The report suggested that with non-OPEC supply growth and a less robust Chinese stimulus package, inventories could grow even if OPEC+ does not increase output.
OPEC+ Delays Production Increase: In September, OPEC+ announced plans to raise supply by 180,000 bpd starting in December. However, earlier this month, the group decided to postpone this supply expansion until January, amid ongoing uncertainties in the global oil market.
Hurricane Rafael’s Impact on U.S. Offshore Production Hurricane Rafael, which had been affecting Gulf of Mexico production, dissipated into a remnant storm by Monday. However, the U.S. offshore production regulator reported that around 25.7% of crude oil output and 13% of natural gas production in the Gulf remained shut due to the storm’s earlier impact.
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