Oil rebounded after a torrid run but remained on course for the longest weekly losing streak since 2018 on concerns about a global glut, with traders doubtful that deeper supply cuts by OPEC+ will be effective.
Global benchmark Brent, which rose toward $76 a barrel, is still headed for a seventh weekly drop. West Texas Intermediate approached $71 after retreating by 11% over the past six sessions. Widely watched timespreads are mired in bearish contango structures through to the middle of next year, with more-immediate contracts trading at a discount to later ones.
Crude has closed every session lower since last week’s meeting between the Organization of Petroleum Exporting Countries and its allies as the group’s plans for deeper cuts were met with skepticism and as supply elsewhere booms, notably in the US. The slump has come even after leading producer Saudi Arabia said the curbs could be extended beyond March, followed by similar remarks from Russia, Algeria and Kuwait.
“We believe the market is providing clear signals that should check the conviction of bulls,” Macquarie analysts including Marcus Garvey and Vikas Dwivedi wrote in a note. “These signals include skepticism about OPEC+ policy effectiveness, perhaps finally and strangely, a reluctance to bet against U.S. production growth after roughly a decade of outperformance by the U.S. shale industry, and maybe a shelving of the structural underinvestment thesis.”
There are also concerns about the trajectory of demand. Chinese consumption is expected to grow by 500,000 barrels a day next year, according to a Bloomberg survey, less than a third of the increase seen in 2023. In the US, meanwhile, many economists see a recession starting next year.
The prolonged retreat in oil — as well as declines in related products such as gasoline — will be a boon for central bankers as they seek to rein in inflation. Average retail motor fuel prices in the US have collapsed to the lowest in a year, according to data from the American Automobile Association.
