Crude oil prices dropped on Wednesday under pressure from demand fears driven by macroeconomic headwinds. At 10.45 GMT, Brent crude oil futures declined by $1.58 or 1.74 per cent, settling at $89.34 per barrel, while US West Texas Intermediate crude (WTI) saw a drop of $1.60 or 1.79 per cent, bringing its price down to $87.63 per barrel, reported Reuters.
This even as major oil producers Saudi Arabia and Russia continue with their commitments to cut crude output until the end of 2023. Despite efforts to stabilise the oil price market, concerns regarding weakening demand stemming from broader macroeconomic challenges persist.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC) is scheduled to convene online on Wednesday. It is widely anticipated that the OPEC+ coalition will maintain its existing oil production levels during the meeting, the report said.
Meanwhile, Saudi Arabia’s energy ministry affirmed on Wednesday its commitment to prolong the voluntary reduction of crude supply by 1 million barrels per day (bpd) until the end of this year. Russia has also declared its intention to extend its current crude export cuts of 300,000 bpd through the remainder of the year, with a further review of its voluntary 500,000 bpd output reduction, initially implemented in April, slated for November.
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However, there are indications that Russia may consider easing its ban on diesel in the coming days, according to a daily Kommersant report on Wednesday, the news agency said. “Market attention has shifted from the focus on the short term tightness to the implications of interest rates staying higher for longer, the subdued macro environment that entails, and how OPEC+ plans to deal with that when it meets on 26th November,” an Investec analyst Callum Macpherson told Reuters.
PVM analyst John Evans on the other hand said that the ongoing strong dollar is adding to the concern that could affect various markets, including the oil market, despite favorable underlying fundamentals. This concern arises from the fact that a strong US dollar tends to make oil relatively more expensive for individuals using other currencies, potentially leading to a decrease in demand.
Additionally, in other economic indicators, the most recent data from the purchasing managers’ index (PMI) for the eurozone indicated a score of 47.2 in September, slightly improving from August’s 46.7. A reading below 50 typically signifies economic contraction, the report noted.