Oil prices dropped on Monday as concerns about weak demand in China and a stronger U.S. dollar weighed on the market. WTI crude fell below $70 per barrel, while Brent traded around $73.30 per barrel. China, the world’s second-largest oil consumer and top importer, announced additional stimulus measures to boost its economy.
However, many analysts considered these efforts insufficient to significantly impact oil demand. Chris Weston, head of research at Pepperstone Group, said, “The crude market has hit a fair value and feels incredibly comfortable at the $70 level.” He acknowledged that U.S. election risks could affect growth expectations but did not anticipate major disruptions in the near term. Giovanni Serio, head of research at Vitol, emphasized that China’s growth in oil demand would continue, primarily driven by the petrochemicals sector rather than transportation.
He stated that growth in petrochemicals could meet the global demand for plastics, highlighting the sector’s importance in China’s future oil consumption.
Oil demand concerns and dollar strength
The retreat in crude prices coincided with weakness in key market indicators.
The nearest futures contract traded at its lowest premiums since June relative to those a few months ahead, suggesting that short-term tightness in the market is easing. Traders have been assessing the global demand outlook for 2025 and the implications of Donald Trump’s re-election, including a surging dollar and tensions between Israel and Iran. With a surplus expected next year, investors will closely follow influential outlooks from OPEC, the U.S. Energy Information Administration, and the International Energy Agency this week.
In its last report, OPEC downgraded its demand forecasts. Ole Hansen, head of commodities strategy at Saxo Bank, said, “A resumption of the dollar rally, which temporarily paused on Friday, is leading to negative sentiment across commodities this morning. The market’s belief in price supportive initiatives in China has deflated.”
