By Scott DiSavino
(Reuters) – Oil prices remained near two-week lows on Tuesday, having fallen about 5% over the past two sessions, as investors rejected OPEC’s latest downgrade for demand growth, a stronger U.S. dollar and had absorbed the disappointment over China’s latest stimulus plan.
Futures rose 6 cents, or 0.1%, to settle at $71.89 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 8 cents, or 0.1%, to $68.12.
On Monday, both crude oil benchmarks fell to their lowest prices since October 29.
“A normal trend for crude oil after a sharp decline would be a recovery to around the midpoint of the previous day’s level within a few sessions,” analysts at energy consultancy Ritterbusch and Associates said in a note.
OPEC lowered its forecast for global oil demand growth in 2024 and also lowered its projection for next year, marking the producer group’s fourth consecutive downgrade.
The weaker outlook underlines the challenge facing OPEC+, a group that also includes the Organization of the Petroleum Exporting Countries and allies such as Russia. This month the group postponed a plan to increase production in December amid falling prices.
“With Chinese demand remaining subdued, OPEC’s supply-side tinkering is not having the desired effect other than keeping the Brent price at $70,” said Gaurav Sharma, an independent oil analyst in London.
OPEC said global oil demand would rise by 1.82 million barrels per day (bpd) in 2024, down from last month’s growth forecast of 1.93 million barrels per day.
The group also lowered its estimate of global demand growth for 2025 from 1.64 million barrels per day to 1.54 million barrels per day.
OPEC remains at the top of industry estimates and still has a long way to go to match the International Energy Agency’s much lower view.
OPEC’s forecast of robust growth in China is “at odds with other forecasters, who have significantly lowered their end-2024 estimates of China’s poor macroeconomic performance and disappointing fiscal stimulus,” said Harry Tchilinguirian, head of research at Onyx Capital Group.
CHINA QUESTION
On Friday, China unveiled a 10 trillion yuan ($1.4 trillion) debt package to ease local government financing problems. Republican former President Donald Trump, who won the US presidential election on November 5, has threatened more tariffs on Chinese goods.
Analysts said China’s plan fell short of the amount needed to boost economic growth.
Another factor that could limit oil demand growth is the foreign policy team Trump is assembling. Trump is expected to tap US Senator Marco Rubio as his secretary of state, sources said. Rubio has in recent years advocated a strong foreign policy toward America’s geopolitical enemies, including China, Iran and Cuba.
“The foreign policy team (which may include Rubio) is being called in to tighten the screws on China, which will threaten oil demand growth from the world’s largest oil-importing country,” said Bob Yawger, director from Energy Futures at Mizuho (NYSE:), said in a report.
DOLLAR STRENGTH
The U.S. dollar also weighed on oil prices, rising to a four-month high against a basket of currencies as investors continued to pile into trades benefiting from Trump’s victory.
A stronger dollar makes oil more expensive in other countries, which can reduce demand.
In Germany, Europe’s largest economy, investor morale clouded this month, an economic research institute said, as Trump’s election and the collapse of the German government unleashed additional uncertainty on Germany’s already ailing economy.
Protectionist policies of the new US administration will hamper global growth and Europe must be better prepared than in 2018, according to policymakers at the European Central Bank.
