Oil Prices Hover Near Seven-Week Low Amid Concerns Over Supply And Weak Demand

Oil prices rose slightly on Monday but remained close to a seven-week low as concerns over excess supply and weaker-than-expected Chinese demand continued to weigh on the market. Brent crude, the global benchmark, edged up after hitting its lowest level since early October, but still traded below $72 a barrel after last week’s steep decline.
Concerns over China’s sluggish demand have intensified as sales of Angolan crude to the world’s second-largest economy slowed. The International Energy Agency (IEA) also warned that global oil markets are likely to face a considerable supply surplus in 2024, adding to the bearish sentiment. Both OPEC and the IEA recently downgraded their demand forecasts, with Saxo Bank A/S noting in a client memo that “crude prices continue to be weighed down by China demand concerns and ample global supply into 2025.”
The oil market has fluctuated in recent weeks amid ongoing geopolitical tensions in the Middle East, with sporadic hostilities sparking concerns over potential disruptions to supply. Despite these fears, however, ample supply from other sources, including U.S. shale producers, has kept the market well-stocked. The rally of the U.S. dollar has also applied downward pressure, with the Bloomberg Dollar Spot Index reaching its highest level in nearly two years last week, making oil more expensive for buyers using other currencies.
In a further sign of softening demand, West Texas Intermediate (WTI) crude’s two nearest futures contracts are close to entering a “contango” structure for the first time since February, indicating near-term oversupply. The prompt spread — the difference between the immediate and future contract prices — narrowed to as little as 2 cents on Monday, suggesting a shift towards a market where current supply outweighs demand.
As 2024 approaches, the oil market remains in a delicate balance, with both demand-side and supply-side pressures influencing prices and investor sentiment.