Oil slips as markets weigh OPEC+ cuts against China demand concerns

Oil prices fell Wednesday, as investors weighed the effectiveness of an extension in OPEC+ cuts in tightening supply against a worsening demand outlook in China.

Brent crude futures fell 80 cents, or 1%, to $76.40 a barrel. U.S. WTI crude futures fell by 81 cents, or 1.1%, to $71.54 a barrel.

The Organization of the Petroleum Exporting Countries and allies such as Russia (OPEC+) agreed on voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024 late last week.

Saudi and Russian officials added this week that the cuts could be extended or deepened beyond March.

But both benchmarks closed at their lowest level since July 6 in the previous session, on a run of four straight days of losses.

“The decision to further reduce output from January failed to stimulate the market and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” PVM analyst Tamas Varga said.

Concerns over China’s economic health, which could limit overall fuel demand in the world’s second largest oil consumer, also weighed on prices.

Rating agency Moody’s lowered the outlook on China’s A1 rating to negative from stable on Tuesday, citing “increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector”.

China will release preliminary trade data, including crude oil import data, on Thursday. Earlier expectations showed China’s refinery runs to have declined in November.

Russian president Vladimir Putin travels to the United Arab Emirates and Saudi Arabia on Wednesday to meet with the UAE’s President Sheikh Mohammed Bin Zayed Al Nahyan and Saudi Crown Prince Mohammed bin Salman.

Oil and the OPEC+ agreement will be on the agenda, the Kremlin said.