Oil Dips as Shaky Demand Outweighs Saudi, Russian Supply Cuts

(Bloomberg) -- Oil edged lower as an uncertain demand outlook and fresh doubts on whether the Federal Reserve has finished tightening outweighed Saudi Arabia and Russia’s extension of supply cuts.

Global benchmark Brent slipped below $85 a barrel, while West Texas Intermediate was near $80. The OPEC+ heavyweights announced over the weekend they would prolong curbs of more than 1 million barrels a day through year-end. Broader financial markets dropped after a Fed official said it’s too soon to declare victory over inflation.

Crude is struggling to find a direction after giving up gains following the Oct. 7 attack by Hamas on Israel, with the conflict yet to threaten supplies from the Middle East, the source of about a third of the world’s oil. Saudi Arabia and Russia, meanwhile, are keeping a tight grip on supplies in the face of a shaky demand outlook, particularly in China, the biggest importer, and Europe.

“The market is completely discounting any risk of disruption coming from elevated geopolitical risks,” said Daniel Hynes, a commodity strategist at ANZ Group Holdings Ltd. “However, there is little change to fundamental data to provide any guidance on the physical market at the moment.”

Europe’s weak economic growth is weighing on manufacturing, cutting demand for diesel and naphtha, according to Wood Mackenzie Ltd. In China, state-owner oil refiners may be forced to reduce operating rates due to falling margins, industry consultant OilChem said.

Official data showed that Chinese crude imports rose in October from a year earlier. Figures from the US later on Tuesday may provide further clues on demand, with the industry-funded American Petroleum Institute set to give its estimate of inventories and the Energy Information Administration its monthly energy outlook. 

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