The oil price has been in a bear market trend for the past seven weeks, with a steady decline. The price of oil rose quite strongly last week Friday, but for the week the “black gold” in the main Brent and WTI contracts wrote off another 4%. The price of US light crude WTI has now fallen for 7 weeks in a row, a new five-year high. This bearish trend is mainly due to record oil production in the US, but also due to an expected drop in demand in China, where oil imports for November were recorded with a 9% year-on-year decline.
The world’s largest association of OPEC+ countries may have decided on further production cuts, but the market is banking on the fact that the negotiated limits won’t be honored as much in the end. OPEC+, the Organization of Petroleum Exporting Countries and allies such as Russia agreed late last week to voluntarily cut output by 2.2 million barrels of oil for the first quarter of 2024. This week, Saudi and Russian officials said the cuts would prevent a first-quarter surge in oil inventories and could be extended or deepened. Despite the OPEC+ supply cut, prices have fallen nearly 11% since settlement on November 29, the day before the OPEC+ meeting.
Over the past week, oil lost 3.8% in price after hitting its lowest level since late June on Thursday, a sign that many traders believe the market is oversupplied. Price Futures Group analyst Phil Flynn said the oil market has found its bottom after six straight declines. However, other world economies are reacting to this trend of declining production and oil prices, such as job growth in the US.
The U.S. Labor Department’s jobs data released showed stronger-than-expected growth. This is due to the strong labour market, which should support demand for fuel in the largest oil market. Data released on US gasoline demand showed that demand last week fell short of the 10-year seasonal average by 2.5% and gasoline inventories rose by 5.4 million barrels, five times more than expected, which led to a drop in gasoline prices.