Another Price Plunge For Oil As Bearish Sentiment Over Near-Term Demand Deepens

Meanwhile, more Venezuelan oil causes Barclays to downgrade its Brent estimates: File Image/Pixabay

More steep losses for oil were incurred on Wednesday, again due to demand worries stemming from China's total exports of goods and services contracting faster than expected in October.

Brent settled down $2.07, or 2.5 percent, to $79.54 per barrel, while West Texas Intermediate settled down $2.04, or 2.6 percent, to $75.33.

In the previous session, oil plunged 3 percent due to the China data, even though some of it suggested that demand in some cases was still robust.

Warren Patterson and Ewa Manthey, analysts at ING, pointed out in a note that the Israel/Hamas war that caused trading pandemonium in recent weeks has suddenly fallen in the long list of concerns in the oil sector: "The market is clearly less concerned about the potential for Middle Eastern supply disruptions and is instead focused on an easing in the balance."

Contributing to Wednesday's bearish sentiment were American Petroleum Institute figures revealing that U.S. crude oil stocks rose by almost 12 million barrels last week (the figure has yet to be confirmed by the U.S. Energy Information Administration).

Also, the EIA said crude production this year will rise by slightly less than expected and petroleum consumption will fall by 300,000 barrels per day (bpd), compared to a previous forecast of a 100,000 bpd increase.

Capping all of this was euro zone data showing declining retail sales, another indication of waning demand.

Ehsan Khoman, head of commodities research at MUFG, said, "Oil bulls are in distress: the mood music has pivoted from pricing in geopolitics-induced supply-side risk premiums back to pricing in demand-side risk discounts."

In other oil news on Wednesday, Barclays reduced its 2024 Brent forecast by $4 to $93 per barrel due to expected higher export production from Venezuela combined with U.S. demand concerns. 

The bank said in a note that "The recent decline in prices is driven primarily by the reappearance of demand concerns and not the fading of the geopolitical risk premium," and it added that "despite the ongoing transition, the supply side appears more constrained."