Oil Market in Turmoil as Prices Plummet to Three-Month Lows Amidst Growing Demand Fears

Oil prices have hit a three-month low as concerns about weakening demand intensify. Global benchmark Brent dipped close to AU$81 per barrel, facing a 4.2% drop on Tuesday, while West Texas Intermediate hovered around AU$77. A US government report predicts a 20-year low in American gasoline demand per capita next year, citing pump prices and inflation as factors contributing to reduced discretionary driving.

Factors Influencing the Downtrend

The recent decline in oil prices is attributed to the disappearance of the Israel-Hamas war-risk premium and a deteriorating demand outlook. Concerns loom over China's economic condition, as the country is the largest oil importer globally. Additionally, doubts arise about the Federal Reserve's completion of tightening measures. On the supply side, Russian shipments are reaching a four-month high, and US crude stockpiles surged by nearly 12 million barrels last week, according to industry data.

Impact on Futures Market

The bearish sentiment is evident in the futures curve, with WTI's prompt time spread narrowing to just 8 cents per barrel in backwardation. This marks a shift from the more bullish scenario observed on October 23, where the backwardation was over $1. Warren Patterson, Head of Commodities Strategy at ING Groep NV, notes, "The market is clearly not as tight as many were anticipating," citing eased concerns over potential Middle Eastern supply disruptions and a shift towards negative sentiment.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com