Oil Prices Steady as Mideast Worries Ease and China Demand Uncertain
Supply Concerns Ease, China Demand Uncertain
Oil prices remained relatively unchanged on Friday, signaling a second consecutive week of losses. The easing of supply concerns in the Middle East and uncertain demand from China, the world’s leading crude importer, contributed to this trend.
Oil Futures Show Modest Gains
At 0735 GMT, futures rose 34 cents, or 0.4%, to $87.19 a barrel, while U.S. West Texas Intermediate crude futures gained 41 cents, or 0.5%, to $82.87 a barrel. The recent market optimism surrounding the Federal Reserve’s likely conclusion of its rate hiking process has supported oil prices,” said Yeap Jun Rong, market strategist at IG. However, concerns remain about the demand outlook due to China’s PMI data, which did not provide much confidence in a demand revival.
China’s Manufacturing Activity Contracts
In October, China’s manufacturing activity unexpectedly contracted, with the official purchasing managers’ index (PMI) falling to 49.5 from 50.2. This dip below the 50-point level, which separates contraction from expansion, adds to doubts about China’s oil demand. Additionally, a private sector survey revealed that while China’s services activity expanded slightly faster in October, sales grew at the slowest rate in 10 months, and employment stagnated as business confidence waned.
Geopolitical Concerns Remain in Focus
Geopolitical concerns continue to hold attention as Israeli forces encircle Gaza City in their assault on Hamas. The Palestinian militant group resists the attack through hit-and-run attacks from underground tunnels. The White House is exploring potential pauses in the Israel-Hamas conflict to enable the safe exit of people from Gaza and facilitate humanitarian aid.
Benchmarks Experience Mixed Results
Both benchmarks gained over $2 a barrel on Thursday, yet Brent is on track for weekly losses of about 4%, while WTI is set to close with a 3% decrease from last week. The U.S. Federal Reserve’s decision to hold interest rates steady, along with the Bank of England’s similar stance, has supported oil prices and restored some risk appetite in the market.
Supply Side and Future Production
Saudi Arabia, the top oil exporter, is expected to confirm an extension of its voluntary oil-output cut of 1 million barrels per day through December. This move aligns with analyst expectations. Additionally, U.S. oil rig count data, expected later in the day, will serve as an indicator of future production levels.
