Oil & Gas

Oil prices continued their downward trajectory on Monday, with the easing threat of a supply disruption from a U.S. storm and disappointing stimulus measures from China contributing to the declines. Brent crude futures fell by 31 cents, or 0.4%, to $73.56 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 38 cents, or 0.5%, to $70 a barrel. Both benchmarks had already fallen over 2% the previous Friday, reflecting growing concerns about global oil demand and supply dynamics.

A key factor weighing on oil prices was China’s much-anticipated stimulus package, which was unveiled during the National People’s Congress (NPC) standing committee meeting on Friday. The stimulus fell short of market expectations, disappointing investors who were hoping for stronger measures to boost fuel demand in the world’s second-largest oil consumer. IG Market analyst Tony Sycamore noted that the unclear forward guidance suggested only modest support for housing and consumption, dampening expectations of a significant economic rebound in the near term.

China's oil consumption has shown little growth in 2024, with economic slowdowns, a shift toward electric vehicles, and greater use of liquefied natural gas (LNG) in place of diesel reducing demand for traditional fuels. Additionally, analysts at ANZ pointed out that the lack of direct fiscal stimulus indicates that Chinese policymakers are likely waiting to assess the impact of upcoming U.S. policy changes, especially under the new administration. Market focus will now turn to December’s Politburo meeting and the Central Economic Work Conference, where further countercyclical measures to stimulate consumption are expected.

Meanwhile, oil prices had initially risen due to concerns over potential supply disruptions from Storm Rafael in the U.S. Gulf of Mexico. As the storm’s impact subsided, supply fears eased, contributing to the latest price declines. Despite this, over a quarter of U.S. Gulf of Mexico oil production and 16% of natural gas output remained offline as of Sunday. However, major oil companies like Shell and Chevron have begun redeploying personnel to restart operations, which could help stabilize production in the region. In the longer term, U.S. refiners are expected to continue running their plants at high capacity, supporting oil prices with strong demand for gasoline and diesel, particularly as inventories remain low.