Brent futures remain below $80/bbl amid recession fears
Front-month ICE Brent has slipped $1.64/bbl lower on the day, to $77.50/bbl at 09.00 GMT.
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Upward pressure:
Commercial US crude oil stocks declined by 5.18 million bbls in the week to 2 December, according to the data released by US Energy Information Administration (EIA). The crude stockpiles now stand at 413.89 million bbls. The US strategic petroleum reserves are down near a four-decade low at 387 million bbls.
China's President Xi Jinping is visiting Saudi Arabia for the first time in nearly seven years, for a summit between the two countries tomorrow. CNN has reported that economists expect an oil-centric summit between the world's largest oil producers and consumers.
Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team tells CNN that “energy cooperation will be at the center of all discussions between the Saudi-Chinese leadership.”
A strategic oil partnership between China and Saudi Arabia could eventually reduce China's oil imports from Russia. This could in turn make it harder for Russia to find outlets for its oil exports.
Wang Guangda, secretary-general of the China-Arab research center on reform and development at Shanghai International Studies University writes in Chinese Communist Party’s official newspaper Global Times, “China and Arab countries are reliable partners who treat each other equally. In their long-term interactions with the Western countries, Arab countries have become tired of the condescending arrogance of the West.”
Downward pressure:
“Oil bulls are feeling the discomfort of a macro-led environment where the prospects of a 2023 global recession are front and center,” says Stephen Innes, managing partner at SPI Asset Management.
There is an increasing chorus of voices predicting a recession in the coming year, with Deutsche Bank, Wells Fargo and the Bank of America most recently joining the chorus. Earlier this week, Goldman Sachs and JPMorgan heads forecast a recession for the US economy next year, while EU Economy Commissioner Paolo Gentiloni has warned of a winter recession in Europe.
The EIA has forecast that crude oil output from OPEC countries will average 29 million b/d throughout the year, a minor increase from its November estimate of 28.9 million b/d. Next year, US crude oil production is expected to average 12.34 million b/d, up from its earlier November projection of 12.31 million b/d.
“We expect the combination of a slight contraction in the US economy and refinery maximisation of distillate fuel production will reduce distillate prices in the first half of next year,” says EIA.
By Konica Bhatt
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