Oil prices suffer on the stock market, fears over demand for crude oil

(Il Sole 24 Ore Radiocor) - The extension of production cuts by eight Opec+ members to the end of November was not enough to dispel doubts about weak crude demand. Oil stocks at Piazza Affari were the losers, with sales on Saipem and Tenaris. Also down were Eni, despite an agreement signed on the eve of the event with Azerbaijan's state energy company Socar on energy security, emissions reduction and biofuel production.

In detail, yesterday Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman announced that they will reopen the taps of black gold only after 1 December 2024, postponing plans to increase production by 180,000 barrels per day initially planned for October. The aim is to stem the heavy falls in crude oil prices, which have plummeted to their lowest levels in more than a year. The recovery will take place "gradually on a monthly basis" and countries will reserve the right to "suspend adjustments or reverse them if necessary".

Immediately after the news, oil prices soared by almost 2%, only to retrace. Caution prevailed in the markets at the moment, with Wti at $69.4 (+0.4 per cent) and Brent at $73 (+0.4 per cent). "Although the postponement of the production increase reduces the chances of the oil market reaching a surplus in Q4 2024, it is unlikely to ease concerns about weak demand in 2025," explain analysts Anz Research. Of particular concern is the resilience of China's economy, the world's second largest consumer and the main driver of crude oil demand growth, while in the US, fears of an economic recession resur with every macroeconomic figure. Factors such as US commercial inventories, which fell by nearly 7 million last week, or the Opec+ decision, or the recent supply disruption in Libya "are supporting Brent prices at $70-72," Citigroup says. However, the bank sees 'a descent towards $60 in 2025, when a significant market surplus will emerge'.