Oil prices fell on Wednesday as investors reassessed whether China’s latest stimulus plans would be able to boost its economy and stimulate fuel demand in the world’s top crude oil importer..
However, lower U.S. crude and fuel inventories, and more violence in the Middle East, provided some support to the market..
Brent crude futures fell 58 cents, or 0.77%, to $74.49 a barrel. U.S. West Texas Intermediate crude fell 60 cents, or 0.84%, to $70.96 a barrel.
Despite a series of monetary support measures announced by China’s central bank on Tuesday, the boldest since the pandemic.
analysts warned that more financial assistance is needed to boost activity in the world’s second-largest economy..
Concerns persisted that more financial support would be needed to boost confidence in the Chinese economy. George Khoury, Head of Global Education and Research at CFI Financial Group, said: “This uncertainty has raised doubts about sustained demand growth, impacting crude prices.”.
Oil prices rose 1.7% on Tuesday after China announced across-the-board rate cuts and more financing. But the demand for credit is already very weak, and the steps did not include any measures to support real economic activity..
Market participants are wondering whether the PBOC’s latest stimulus measures are enough to support China’s economic growth and oil demand.” I continue to see crude prices rise further, as oil inventories continue to decline globally”.
U.S. oil inventories fell by 4.34 million barrels last week while gasoline inventories fell by 3.44 million barrels and distillate inventories fell by 1.12 million barrels.
according to market sources quoting American Petroleum Institute figures on Tuesday.
Oil prices under pressure and expected surplus until 2025
Oil prices are expected to remain low until 2025 Due to high global oversupply risks, a combination of slowing demand from major economies, especially China, and continued growth in US shale oil production contribute to a bearish outlook for oil prices.
Despite tight current inventories, the expected easing of OPEC+ production cuts by the end of 2024 supports the prospect of oversupply next year.
Wells Fargo states that the oil market is at a tipping point, moving from tight supply in 2024 to a potential surplus by 2025.
Wells Fargo notes that both the United States and China, traditionally powerful drivers of global oil demand, are showing signs of slowing growth. In the United States, shale oil production has matured.
and the rate of growth has slowed despite continued production from the Fertile Permian Basin.
On the demand side, China’s economic growth has slowed, reducing its appetite for oil, a key factor in global oil price trends.
In 2025, global oil supply is expected to exceed demand by about one million barrels per day during peak production months.
This is partly due to the expected increase in OPEC+ production, which has been constrained to stabilize prices.
Wells Fargo expects total oil supply to rise from 102.8 million bpd in 2024 to 104.8 million bpd in 2025.
driven by non-OPEC producers such as the United States and Brazil, along with planned increases by OPEC.
Wells Fargo has revised its near- and medium-term oil price forecast downward. The company now expects Brent crude to average $70 per barrel in 2025, down from previous estimates. Similarly, the price of WTI is expected to average $65 per barrel in 2025.
This represents a decline from the second-quarter 2024 average of $80 per barrel for Brent and $75.25 for WTI.
Low petrol and diesel prices in the UK
Petrol and diesel prices fell to three-year lows in the UK thanks to lower oil costs and a strengthening pound, according to automotive group RAC..
RAC said gasoline prices across the country averaged 135.87 pence on Tuesday.
having fallen from a peak of 192 pence in July last year.
RAC added that there is room for fuel prices to fall further over the coming months as retailers pass on lower wholesale costs.
Group spokesman Simon Williams said: “Relatively low oil prices.
due to low global demand, and a relatively strong pound sterling are the factors contributing to lower station prices.
“Seeing station prices drop to this level is really positive news, both for households that rely on their vehicles to get around, and for the wider economy – where there is a clear link between the cost of fuel and headline inflation.”
Although these price levels are below their 2022 highs.
when Brent crude peaked at nearly $100 per barrel, they remain above levels seen in periods of historical low demand..
One crucial factor preventing prices from falling further is Saudi Arabia’s preference for keeping prices above $70 per barrel.
as the kingdom seeks to balance revenue generation and maintaining market share.
Investor sentiment reflects this ambiguity. Speculative interest in crude oil futures turned net negative, suggesting market participants expect further price weakness in the near term.
U.S. shale production, which has been a driver of global oil supply growth over the past decade, is showing signs of maturation. While the Permian Basin remains productive, overall U.S. oil production growth is slowing.
