Global oil prices fall for sixth consecutive session
Global oil prices fell for a sixth straight session on Thursday, with the declines amounting to just a few cents. Some traders now believe that the selling pressure has subsided.
US West Texas Intermediate (WTI) crude oil closed lower, hitting a fresh five-month low as it failed to maintain early gains. WTI crude oil for January delivery closed down by 4 US cents at $US69.34 per barrel, the lowest level since June 27. Meanwhile, February Brent crude, the global benchmark, dropped by 13 cents to $US74.17.
Despite the rapid drop in US Treasury bond yields, which typically benefits commodities like oil and gold, oil prices continued to slide. The yield on the US 10-year Treasury bond hovered around 4.13%, aiming for a rise towards 4%. Currently, the yield is down 20 points in the past five days and 48 points in the past month.
Although the US dollar weakened by approximately half a percent and the Aussie dollar strengthened to above 66 US cents, oil prices reached five-month lows. This decline is attributed to doubts in the market regarding the impact of OPEC+'s decision on November 30 to add less than one million barrels per day of voluntary cuts in addition to existing cuts. Many traders remain skeptical due to the voluntary nature of the agreement and discrepancies in production levels among participating countries like Russia.
Other factors contributing to the downturn in oil prices include weakening winter demand, higher US stocks of petrol, lower Chinese imports, and forecasts of slowing economies in 2024, which have had a more pronounced and negative impact on market sentiment.
ANZ Bank commented, "The voluntary nature of the agreement appears to have fallen short of what the market wanted. The lack of details opens the prospect of producers sidestepping their commitments. The notional 2mb/d of production cuts are in effect only 700kb/d. Saudi extended its current 1mb/d cut until the end of Q1 2024. The Russia commitment is in the form of exports, not production. That leaves reductions from countries such as Iraq, Kuwait, and UAE as the only change to output on an incremental basis."
On a positive note, the Energy Information Administration reported the first drop in US stocks in seven weeks on Wednesday, providing some support for oil prices. Additionally, US production fell back to 13.1 million barrels per day from a record 13.2 million bpd a week earlier, although US stocks of petrol remain at two-year highs.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.