Crude oil futures started the week without much change, but they are still facing significant challenges due to concerns about global demand. Despite some geopolitical tensions that have caused fluctuations in the market, the impact on oil supply has been limited so far. Although there are short-term risks due to ongoing geopolitical issues, it is unlikely that there will be a long-term increase in oil prices because demand concerns are more significant than geopolitical developments.
The main issue affecting the market is the worry about weakening demand, especially in China, which is the second-largest oil consumer in the world. Data from October revealed a noticeable decrease in China’s refinery throughput, as well as a broader slowdown in factory output, indicating lower-than-expected oil consumption. On top of that, the International Energy Agency has predicted that global oil supply will exceed demand by 2025, even if OPEC+ continues to cut production. This forecast has worsened the bearish sentiment in the market, suggesting a possible oversupply situation that could further push down prices.
Moreover, the reduction in the number of active oil rigs in the U.S. and the uncertainty surrounding U.S. interest rate decisions have contributed to the negative outlook for the market. With all these factors in play, the global crude oil market is expected to face a bearish outlook in the short to medium term, with supply likely to surpass demand. This has led to a sense of caution among investors and has added downward pressure on oil prices.
In conclusion, while geopolitical developments may cause some volatility in the oil market, the bigger concern is the weakening global demand for oil. With China experiencing a slowdown in oil consumption and projections of oversupply in the market, it is clear that the challenges facing the crude oil market are more related to demand dynamics rather than geopolitical tensions. This situation is likely to persist in the near future, keeping oil prices under pressure.
