Crude oil prices dropped sharply on Thursday as weak demand projections from China and the United States—the world’s two largest oil consumers—sparked concerns in the global commodities market. Both nations are grappling with slowing economic performance, leading to expectations of reduced oil consumption.
In the United States, the Energy Information Administration (EIA) reported an increase in strategic petroleum reserves, exerting downward pressure on prices. Brent crude fell to $72.33 per barrel, while the US benchmark, West Texas Intermediate (WTI), slipped to $68.46 per barrel.
China’s economy has also shown signs of deceleration, with growth reaching 4.8% in the first nine months of 2024—falling short of the 5% annual target. November’s Purchasing Managers’ Index (PMI) revealed stagnation in the services sector, dropping 0.5 points month-on-month. The non-manufacturing PMI remained nearly static at 50.1, indicating limited momentum. Weak domestic demand and persistent deflationary pressures have further eroded China’s economic outlook, adding to concerns about reduced oil demand.
In the US, economic signals also fueled bearish sentiment. The Institute for Supply Management (ISM) reported a 3.9-point decline in its services PMI, which fell to 52.1 in November—below market expectations. Additionally, October’s factory orders grew by a modest 0.2%, underperforming projections.
EIA data also showed a 1.4 million-barrel rise in strategic petroleum reserves last week, reaching 391.8 million barrels, alongside a 2.4 million-barrel increase in gasoline inventories. These trends highlight weakening demand and contributed to the downward movement in oil prices.
However, expectations of a US Federal Reserve interest rate cut helped temper the price decline. Federal Reserve Chairman Jerome Powell hinted at the possibility of rate adjustments, with market odds of a 25 basis point cut at the December 18 meeting rising to 78%.
Attention is now shifting to the upcoming OPEC+ decision on oil production cuts for early 2025. The group is widely expected to extend its current supply cuts into the first quarter, a move that could help stabilize prices in the short term.
