Dec 13, 2023: In Asian trade on Wednesday, oil prices stabilized following a steep decline of over 3% to six-month lows in the prior session due to concerns about oversupply and demand dynamics.
The February contract for Brent crude futures showed a marginal decrease of 1 cent, resting at $73.23 per barrel by 0207 GMT. Simultaneously, U.S. West Texas Intermediate crude futures for January slid by 2 cents, reaching $68.59 per barrel.
The market stumbled in the previous trading session as stronger-than-anticipated U.S. inflation figures for November reinforced the notion that the Federal Reserve might not initiate early interest rate cuts next year. This outlook raises concerns about potential impacts on consumption levels.
ANZ analysts highlighted that the weekly average of Russian crude exports surged to the highest level since July, adding to worries of oversupply. This surge in exports casts doubt on the effectiveness of the recent output reduction agreement by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.
Additionally, the U.S. Energy Information Administration revised its 2023 supply forecast upwards by 300,000 barrels per day to 12.93 million barrels per day in its latest Short-Term Energy Outlook report, further contributing to the bearish sentiment.
This outlook indicates a continued decline in oil prices for the ongoing week, continuing the trend of seven consecutive weeks of decreases.
According to market analyst Tina Teng from CMC Markets (LON:CMCX), the direction of markets will heavily hinge on the policy meeting outcome from the U.S. central bank concluding later on Wednesday. Teng commented, “A more hawkish stance by the Fed could trigger a further downturn in crude prices.”
While the Federal Reserve is widely anticipated to maintain existing interest rates, investors are keen on understanding Fed officials’ perspectives on the economy and their outlook on future interest rates.
In other news, the United Nations passed a resolution on Wednesday calling for an immediate ceasefire in Gaza. President Joe Biden cautioned about Israel risking international support due to civilian casualties.
Amidst ongoing discussions at COP28, governments continued to grapple over the future of oil and fossil fuels on Wednesday morning. A draft agreement on Monday faced criticism for its failure to advocate for a phase-out of fossil fuels.