Oil Dips With OPEC Voicing Caution on Strength of Global Demand

(Bloomberg) -- Oil slid as OPEC producers questioned the strength of crude demand even after prices hit the highest since 2014.  

Futures in New York fell as much as 1.5% on Wednesday, after rallying for four straight sessions. OPEC revised down its estimate for 2021 global oil consumption in its monthly market report. The group said that while the spike in natural gas prices could boost petroleum use in some areas, such as power generation, it could potentially curb demand in other areas, such as refining. Meanwhile, U.S. consumer prices rose in September by more than forecast, underscoring the persistence of inflationary pressures on the economy.

“The fact that they remain cautious on oil demand despite the price jump, that’s a cautious tale right there,” said Bob Yawger, director of the futures division at Mizuho Securities USA. 

Crude has surged this year as a rebound in activity from the pandemic has boosted consumption, depleting inventories. In addition, shortages of natural gas and coal have driven rising demand for alternative power generation and heating fuels in Asia and Europe ahead of the winter. 

However, OPEC’s estimate for global oil demand growth this year was reduced to 5.8 million barrels a day, down from 5.96 million barrels a day previously. The change was due to lower consumption data in the first nine months of the year, while total fourth-quarter demand was revised up by 120,000 barrels a day to 99.82 million barrels a day.  

Meanwhile, Russian President Vladimir Putin said crude prices could reach $100 a barrel. He also said that his country is ready to supply as much gas to Europe as it needs. 

While crude futures take a breather, many analysts still see upside for the commodity with technical indicators pointing to a continued bullish trend. WTI in the short term will see some selling pressure, but any dips in prices until crude hits the $76.50-a-barrel level will likely be viewed as a buying opportunity by traders.

“The trend is still clearly bullish and requires a macro driver to turn the tide,” said Fawad Razaqzada, financial market analyst at ThinkMarkets. 

More stories like this are available on bloomberg.com

©2021 Bloomberg L.P.