OPEC Report Dampens Demand Concerns As Oil Gains More Than 1%

Oil prices gained more than 1% on Monday, as OPEC’s monthly market report allayed investor concerns about dwindling demand in the United States and China.

Brent crude prices were up $1.25, or 1.5%, at $82.68 a barrel as of 11:58 a.m. ET (16:58 GMT), while WTI crude futures were up $1.24, or 1.6%, at $78.41.

OPEC stated in a monthly report on Monday that oil market fundamentals remained solid and blamed speculators for the price dip. OPEC raised its 2023 projection for global oil demand growth somewhat but maintained its relatively high 2024 forecast.

“The OPEC monthly oil market report appeared to push back against demand concerns, referencing overblown negative sentiment around Chinese demand while raising demand growth forecasts for this year and leaving them unchanged for next,” said Craig Erlam, senior market analyst at OANDA.

Investors were concerned after the US Energy Information Administration (EIA) announced last week that the country’s crude oil production will climb somewhat less than previously predicted this year, while demand will fall.

Markets were also concerned about the probable tightening of US monetary policy after Federal Reserve Chair Jerome Powell stated last week that the central bank could hike interest rates again if inflation is not controlled.

Weak economic data from China, the world’s largest crude oil importer, fuelled concerns about dwindling demand last week. Chinese refiners requested reduced supplies from Saudi Arabia, the world’s largest exporter, for December.

Still, oil prices may have found a bottom after they slid about 4% last week and recorded their first three-week declining streak since May, said Fawad Razaqzada, an analyst at City Index.

“Given that oil prices have weakened in the last few weeks, Saudi Arabia and Russia will likely continue with their voluntary supply cuts into next year. This should therefore limit the downside potential,” Razaqzada said.

Last week, top oil exporters Saudi Arabia and Russia, part of the group known as OPEC+, confirmed they would continue with additional voluntary oil output cuts until the end of the year as concerns over demand and economic growth continue to drag on crude markets.