Oil Prices Drop To New Monthly Lows

Oil Prices Drop To New Monthly Lows by Andrew Blumer last updated on December 11, 2023

Oil Prices Drop To New Monthly Lows Over Demand Woes

The decline in oil prices continued during Wednesday's session and has already reached 3-month lows. The reason behind the weakness in the oil is the concerns about the declining demand from China and the USA.

Considering how the USA and China are among the top economies of the world, it makes sense for the oil to drop over demand woes.

Oil Futures Down By -0.8%

The US Crude Futures were trading with a -0.8% decline near $76.72. In addition, the Brent crude futures were seen near $80.99 with a decline of -0.8% as well. Both of these benchmark contracts are seen trading at the levels only seen during July 2023.

While the oil prices continue to decline, a build-up of oil inventories is witnessed in the USA. According to official data, an increase of 12 mn barrels was seen in the last week alone. On the contrary, the inventories saw a 300K draw during the same period.

In simple words, the demand for oil is declining in the USA, which is leading to a build-up of stockpiles. When we combine this with the winter season, it means there will be even less traveling by the US population. So that's yet another reason that supports lower oil prices.

The data from the API also shows a similar scenario, but we will have to wait for the official announcement, which is postponed for a few more days.

The demand woes have further intensified now that the data coming from China is also showing economic weakness. Since China is among the top crude importers in the world, it also means bad news for crude oil.

In October, the exports of China declined a lot more than the forecasted numbers. In addition, the trade surplus of China is also at one of its lowest levels in almost 1.5 years.

According to ING, a build-up of oil stocks in the USA and other countries will likely occur in the near term.