Investing.com - “No, not again!” — the Saudis must be thinking.
But that’s exactly what it was as crude prices hit near seven-month lows on Tuesday, plunging to $70 territory, as disappointing trade data from China raised fresh concerns about the economic health of the world’s largest crude importer.
New York-traded West Texas Intermediate, or WTI, crude for December delivery, settled at $77.37 per barrel, down $3.45, or 4.3% on the day. The session low for the US crude benchmark was $77.28, marking a bottom not seen since April.
As WTI settled, UK-origin Brent crude’s most-active January contract was at $81.67, down $3.51, or 4.1%, by 14:30 Eastern US Time (19:00 Greenwich Mean Time).
The US crude benchmark’s 4% drop since the start of November adds to October’s torrid 11% loss.
For Brent, this month’s 3% drop comes on top of the previous month’s 11% plunge.
Oil’s correction came as the market unwinds all of the war risk premium from the Israel-Hamas war and defied pledges of supply cuts through the year-end by OPEC+ heavyweights Saudi Arabia and Russia to keep prices up.
“That we're seeing data that confirms economies are struggling under the pressure of high interest rates which are not expected to decline soon may also have contributed to oil reversing its gains,” said Craig Erlam, analyst at online trading platform OANDA.
“It's no surprise then that Saudi Arabia and Russia remain committed to their end-of-year cuts, it's just a question of whether they will be extended. That they haven't already perhaps suggests there's some reluctance too, which may also be weighing on prices a little
Data released on Tuesday showed that China's exports shrank more than expected in October, while the country's trade surplus was at its worst level in 17 months.
Imports unexpectedly grew during the month, highlighting some improvement in local demand as Beijing rolled out more stimulus measures, but the prolonged weakness in exports could stymie growth in the country and dent oil demand.
Also weighing on market sentiment was weak economic readings from the eurozone and U.K., which raised concerns that slowing economic growth will weigh on oil demand in this important energy consuming region.
Dollar rebound weighs on crude market
The dollar rose from a six-week low as Minneapolis Fed President Neel Kashkari warned that the central bank may not be done raising interest rates.
Kashkari’s comments somewhat dented expectations that the Fed was done raising interest rates, spurring a rebound in the dollar, which in turn weighed on oil prices.
Net long positions sharply reduced
The crude market had recorded steep losses last week, as traders had begun to factor in growing bets that the Israel-Hamas war will not disrupt supplies in this oil-rich region.
The latest positioning data shows that money managers reduced their net long positions in both the NYMEX WTI and ICE Brent contracts, “driven by fresh shorts entering the market, whilst there was obviously a fair amount of long liquidation,” said analysts at ING, in a note, resulting in “smallest net long speculators have held in WTI since July.”
(Peter Nurse and Ambar Warrick contributed to this)