Oil prices weaken on Monday, as investors are disappointed by Beijing's recovery plan while awaiting the publication this week of monthly reports from OPEC and the IEA on production.
Oil: eight OPEC+ members extend their production cuts until the end of December
Around 10:15 a.m. GMT (11:15 a.m. in Paris), the price of a barrel of Brent from the North Sea, for delivery in January, lost 1.22% to $74.13. Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in December, fell 1.44% to $69.37.
The market disappointed by the Chinese recovery plan
“The fiscal stimulus measures announced by China on Friday have not revived investors' appetite for crude oil” explains Ipek Ozkardeskaya, analyst at Swissquote. China, the world's largest oil importer, is already struggling with a laborious post-Covid recovery, weighed down by sluggish consumption and a severe real estate crisis, and the slowdown in its economic activity has been weighing down oil prices for several months . “Large banks are revising their growth forecasts downwards” for the Asian giant, specifies the analyst.
Crude prices are also stalling because “this week all major forecasters will release their monthly oil reports”recall DNB analysts, explaining a limited movement on the markets. OPEC (Organization of the Petroleum Exporting Countries) will publish its report on Tuesday, that of the American Energy Information Agency will appear on Wednesday, and the International Energy Agency (IEA) will publish its report on Thursday.
The return of Trump, a boon for the oil industry
The market's indecision is reinforced by the difficulty of assessing the adverse effects on the price of black gold caused by Donald Trump's second term after his victory last Wednesday in the American presidential election. The president-elect is a strong defender of fossil fuels and the market expects favorable conditions for American producers.
After Trump's victory, the oil industry is jubilant
If he keeps his promises, the new president should very quickly decide to torpedo the restrictions on drilling in the Arctic part of Alaska, put in place by his predecessor. It is also expected to issue tenders for more oil concessions in the Gulf of Mexico. Another measure eagerly awaited by the industry: the lifting of the temporary freeze permits for new terminals dedicated to the export of liquefied natural gas (LNG), established last January by Joe Biden.
Which would lead to an even more abundant supply from the United States. However, already, under the Biden era, and despite its climate policies which the fossil fuel lobby has regularly complained about, the country had never produced so much crude. Daily production now stands at around 14 million barrels of oil per day.
…but uncertain effects on the global market
Still, pushing the level of oil production even higher will not be an easy task. Indeed, the industry will have to make large investments: the lifespan of an unconventional oil well is only around three years. In addition, its deposits are of average quality. “The United States has room for improvement, but everything will depend on the price”recently pointed out Ahmed Ben Salem, analyst at Oddo. If the price of oil on the markets is low, and lower than the marginal cost of American production, it will no longer be relevant to invest in production. “ However, it is not excluded that Saudi Arabia decides to enter into a price war », Warns the analyst.
However, prices could also be pushed higher by the possibility of tougher sanctions against Iran and Venezuela under the Trump administration and slowing investment in renewable energy.
With AFP
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