Oil Drops for Second Day With China Outlook and Demand in Focus

(Bloomberg) -- Oil fell for a second day as a soft outlook in top importer China continued to plague the market.

Brent traded below $74 a barrel after losing more than 2% on Friday, while West Texas Intermediate was close to $70. Data at the weekend showed anemic Chinese consumer inflation in October, while factory-gate prices fell again. That came after Beijing unveiled a debt-swap plan on Friday to bolster the economy, but stopped short of unleashing new stimulus, disappointing investors.

Crude traders have been assessing the outlook for global demand heading into 2025, as well as the implications stemming from Donald Trump’s election to the White House and tensions between Israel and Iran. With a surplus widely expected next year, investors will get a slew of influential outlooks this week, starting with the view from OPEC on Tuesday.

“The crude market has hit a fair value and feels incredibly comfortable at the $70 level,” said Chris Weston, head of research at Pepperstone Group. “Granted, we have US election risk that could impact growth expectations, but we’re not expecting that battle to bite and impact this week.”

Timespreads show that the strength of the physical market is ebbing. While Brent’s prompt spread — the gap between its two nearest contracts — is still in a bullish, backwardated structure, the differential is narrowing. It was 27 cents a barrel in backwardation, compared with 44 cents a month ago.

After the outlook from the Organization of the Petroleum Exporting Countries, the US Energy Information Administration will issue its short-term view on Wednesday, followed by the International Energy Agency the next day. In its last snapshot, OPEC downgraded its demand forecasts.

©2024 Bloomberg L.P.