Oil prices to fluctuate on China slowdown, supply-demand mismatch

Global oil prices will continue fluctuating due to doubts over the efficacy of oil-producing countries’ production cuts, combined with slumping demand in China and increases in U.S. inventory reserves, market watchers said Thursday.

The price of West Texas Intermediate crude oil for January next year came to $69.38 (91,997 won) per barrel, Dec. 6 (local time), down 4.1 percent from the previous day. This was the first time since July 3 that the price has fallen below $70 per barrel.

Brent crude oil for January delivery stood at $74.30 per barrel on the London Intercontinental Exchange (ICE), down 3.8 percent from the previous session.

Behind the steep fall is growing market concern that members of OPEC+, which includes Organization of the Petroleum Exporting Countries (OPEC) member nations and other oil producing countries, will not cut production as agreed last month.

OPEC+, which accounts for 40 percent of global production, said about 1 million barrels per day will be cut next month. But the non-binding deal has no way of enforcing delivery.

Concerns over China’s slowdown are also intensifying, as indicated by Moody’s, a global ratings agency, downgrading China’s credit rating outlook, Tuesday (local time). The agency lowered the credit outlook to negative from stable, citing risks related to “structurally and persistently lower medium-term economic growth” and property sector woes.

“China, the largest consumer of crude oil, is facing a bleaker growth outlook,” Kiwoom Securities researcher Kim Yu-mi said. “China’s economic slowdown will dampen crude oil demand in the months to come.”

She added, “Also at play was market watchers judging the OPEC+ announcement lacked certainty about its implementation. Reports of the U.S. energy industry increasing crude oil reserve inventory was a factor for a further price dip.”