Oil prices were lower on Tuesday as the global economic outlook struggled.
Recent talk of production cuts from OPEC+ had a marked effect on crude, but the price has declined this week.
USOIL – Weekly Chart
Last week was a big one as crude oil prices rallied from under the $80 per barrel mark to a price of almost $95. We have since seen a slump to $88, but that may only be temporary.
Economic concerns grew when the International Monetary Fund (IMF) cut its 2023 world GDP estimate to 2.7% from a previous estimate of 2.9% and warned that “the worst is yet to come.”
Concerns about the Chinese economy have weakened demand expectations and has been bearish for crude prices. A new article in China’s state-sponsored People’s Daily newspaper also said that the country’s Covid Zero policy is “sustainable,” and the government must stick to the strategy.
China has embarked on severe Covid lockdowns that have hurt energy demand in recent months. According to recent figures, the job outlook for its people is the worst. Due to those lockdowns, Chinese refineries handled the least amount of oil since March 2020 in July. Further refinery shutdowns for maintenance also had an impact.
Crude prices soared last week after OPEC+ agreed to cut output by -2.0 million BPD for November and December, a more significant cut than expectations of -1.0 million BPD. That would probably be around 1 million BPD due to reductions in crude oil production, according to the energy minister of Saudi Arabia, who noted that some members were already pumping below their allotted amounts. India lifted the market outlook with more robust crude demand as oil product consumption rose over 8% year-on-year.
Oil prices were boosted when the Nigerian oil minister announced that the OPEC group wanted crude oil prices around $90 per barrel and “we have to take every step to ensure prices remain” in this range.
OPEC crude oil production for September rose 230,000 BPD to a 2.5-year high of 29.89 million BPD. Higher exports from Libya are bearish for the market after Libya Sep crude exports jumped by 25% monthly to 1.16 million BPD.
This week will see economic data impacting the price of crude, with FOMC meeting minutes on Wednesday being a guide for the next policy steps of the Federal Reserve. We have the latest US inflation data the following day, and a higher-than-expected reading could negatively impact crude oil.
