Oil price remains lower after Tuesday’s steep decline

Early on Wednesday, oil prices continued to decline from their lowest points since July. West Texas Intermediate, at $77.30 per barrel, saw minimal movement. The global benchmark, Brent crude, increased by 0.1% to $81.69 per barrel. The price of a barrel of Brent crude dropped $2.14, or 2.6%, to $79.47. At $75.25, US crude fell $2.12, or 2.7%. It was the lowest point for both benchmarks since mid-July.

Clearly, the market is more focused on an easing of the balance than it is on the possibility of Middle Eastern supply disruptions. Oil prices are declining as OPEC+ is sidelined and China, one of the major demand-side players, struggles.

The benchmark oil price saw a 6% decline in one trading day at the beginning of October, and this Tuesday saw another glaring 5% devaluation. When the American Petroleum Institute (API) released overnight data showing a significant build-up in stockpile of 11.9 million barrels, the decline quickened.

In the meantime, the US dollar was strengthening in an attempt to recoup some of the losses it had sustained the previous week. When the Australian Central Bank hiked rates in an unusual manner on Tuesday morning, traders began to wonder if the Fed would dare to hike again. Even so, the US Dollar Index (DXY) remains stable above 105 and is searching for guidance.

As of this writing, WTI is trading at $75.59 per barrel while Brent Oil is down even more, from $81.09 to $79.74 per barrel. There may be less demand for oil in the upcoming quarter given the unfavourable results of both the US and European earnings seasons.

The future of China’s oil demand is not promising: the country’s refining margins are narrowing, its oil stockpiles are growing, and air travel is returning to its pre-pandemic levels. More concerns are raised by the latest depressing data regarding China’s exports.

In contrast to the previous build of 1.374 million barrels, the weekly American Petroleum Institute Crude Stockpile figures showed a build of 11.9 million barrels.

It is scheduled for the Energy Information Agency (EIA) to release its most recent stockpile figures. There were no projections planned for the 0.774 million barrels that were built previously. The market was concerned about Asian demand the day before, as both benchmarks posted declines of more than 4%.

Clearly, the market is more focused on an easing of the balance than it is on the possibility of Middle Eastern supply disruptions. Pressure is intensifying as supply rises and Russian exports increase. Due to rising US crude inventories, the weakness observed yesterday is probably going to persist today.