Variation in oil prices as the market assesses OPEC+ cuts and Chinese demand concerns

Oil prices varied in Asian trading on Wednesday, after recording losses over four sessions, as markets evaluated the effectiveness of OPEC+ production cuts and concerns about the deteriorating demand prospects in China.

By 0438 GMT, Brent crude futures rose one cent to $77.21 per barrel. US West Texas Intermediate crude futures fell four cents to $72.28 a barrel.

Both benchmarks closed at the lowest level since July 6 in the previous session, and US crude fell for four consecutive days.

The OPEC+ group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, agreed late last week on voluntary production cuts of about 2.2 million barrels per day for the first quarter of 2024. These cuts include an extension of the Saudi and Russian voluntary reduction of 1.3 million barrels per day.

Analysts say concerns about the impact of the conflict between Israel and the Palestinian Islamic Resistance Movement (Hamas) on supplies provide some support after previous price declines.

“Fears about a possible escalation in the conflict between Israel and Hamas have resurfaced after the United States held Iran responsible for an attack on American ships,” said Priyanka Sachdeva, chief market analyst at Philip Nova.

Prices were also affected by concerns about the health of the economy in China, which is the second largest oil consumer in the world.

Moody’s on Tuesday lowered its outlook on China’s rating to negative from stable, citing “increasing risks associated with structurally and persistently low economic growth in the medium term and the continued contraction of the real estate sector.”

Adding to the pressure, crude oil and fuel inventories rose in the United States in the week ending December 1, according to market sources, citing American Petroleum Institute figures on Tuesday.

The sources, who requested that their identities not be published, reported that crude stocks increased by 594 thousand barrels. Gasoline stocks rose by 2.8 million barrels, while distillate stocks increased by about 1.9 million barrels.

US government data on inventories is scheduled for release on Wednesday.