Oil prices sink due to bearish demand data and with easing of supply woes

By Duygu Alhan and Sibel Morrow

Oil prices contracted on Monday as a result of Iraq’s optimism that it will soon achieve an agreement to resume oil production from its Kurdish area, China's weak trade rates and data indicating a decline in US oil demand.

International benchmark crude Brent traded at $80.83 per barrel at 10.14 a.m. local time (0714 GMT), a 0.74% fall from the closing price of $81.43 a barrel in the previous trading session on Friday.

The American benchmark, West Texas Intermediate (WTI), traded at the same time at $76.56 per barrel, down 0.79% from Friday's close of $77.17 per barrel.

Both benchmarks started the week with supply concerns eased after Iraqi Oil Minister Hayan Abdel-Ghani stated on Sunday that he expects to reach an agreement with the Kurdistan Regional Government (KRG) and foreign oil companies on resuming oil production from the region within three days.

During a visit to the capital of the region, Erbil, Abdel-Ghani stated that Iraq and Türkiye had reached an "understanding" over the restoration of northern oil shipments via the Iraq-Türkiye pipeline, thereby alleviating supply problems.

Saudi Arabia's decision to implement an additional 500,000 barrels per day (bpd) cut until December 2024 and Russia's announcement to cut its oil and oil product exports by more than 300,000 barrels per day (bpd) during the same period reignited supply risks, even though the US indicated a slowdown in gasoline demand.

In its Short-Term Energy Outlook published last week, the US Energy Information Administration (EIA) forecasted a 1% decline in the country's gasoline consumption next year, which would result in the lowest per capita gasoline consumption in two decades.

An increase in remote work in the US, fuel efficiency improvements in the US’ vehicle fleet, high gasoline prices and persistently high inflation have reduced per capita gasoline demand, the EIA said.

The agency also warned that although the conflict between Israel and Hamas has not affected physical oil supply at this point, uncertainties surrounding the conflict and other global oil supply conditions could put upward pressure on crude oil prices in the coming months.

Meanwhile, bearish economic data in China, the world’s largest oil importer, once again raised deflationary concerns and exerted downward pressure on prices.

Casting doubts on a postpandemic demand recovery in the country, China's consumer prices dropped by 0.2% annually in October, more than the market forecast, according to official data released on Thursday.

Data from the National Bureau of Statistics of China showed a swing from the flat reading in the prior month. Economists expected a 0.1% year-on-year decline in October consumer prices.