On Thursday, oil prices declined as concerns about demand due to a cyclical slowdown throughout the winter and an unclear economic future for China exceeded anticipations of tighter supply from extended production curbs in Russia and Saudi Arabia.
After nine straight gaining sessions, the price of Brent crude futures dropped 36 cents to $90.24 per barrel by 0645 GMT. After seven sessions of increases, US West Texas Intermediate crude futures declined 37 cents to $87.17 per barrel.
After the two largest oil exporters in the world, Russia and Saudi Arabia, extended voluntary production cutbacks to the end of the year, both benchmarks had soared earlier this week. These were additional cuts to those made in April by members of OPEC+ that will last through the end of 2024.
According to Leon Li, an analyst based in Shanghai for CMC Markets, because of supply constraints, it is now very challenging to identify any unfavorable factors. However, potential dangers related to demand must be taken into account, such as the possibility that, once the summer demand declines, the market might slow down and enter an off-peak period for oil use in the final quarter.
Participants in the market also analyzed mixed data from China. In August, overall exports decreased by 8.8% and imports decreased by 7.3% compared to the same month last year. However, a 30.9% increase in crude imports was seen.
Li claimed that the Chinese economy was showing some positive indicators. The degree of the trade data drops was less severe than anticipated, and the Chinese government also implemented a number of regulatory measures to support the financial as well as real estate sectors.
Although the speed of China's recovery in demand should have accelerated after July, he continued, it still remains too early to assess it.
Market volatility was also caused by worries about increasing oil production from Venezuela and Iran, which might partially offset cutting of production from Russia and Saudi Arabia's.
The comeback of sanctioned oil from Iran is undermining OPEC+'s efforts in some way. According to a survey by BMI research experts, Iranian crude output has increased year-to-date, rising from 2.55 million bpd in January to 2.83 million bpd in July.
They added that they also identify upside risk to their Venezuelan output prediction, with reports that US authorities are developing ideas to remove sanctions if Caracas moves forward with preparations for carrying out new presidential elections.
Based on market sources quoting American Petroleum Institute data, US crude oil stocks were anticipated to have decreased by 5.5 million barrels during the week ending September 1, which helped support prices.
On Thursday, at 11 a.m. EDT, the US Energy Information Administration is expected to release official inventory statistics.