Oil prices experienced a modest recovery in Asian trading on Monday, following a significant drop of more than 7% last week. The fall was driven by concerns over weakening demand in China, the world’s largest oil importer, alongside reduced fears of potential supply disruptions in the Middle East.
Brent crude futures rose slightly by 27 cents, reaching $73.33 per barrel by 0625 GMT. U.S. West Texas Intermediate (WTI) crude futures also saw a small increase, gaining 31 cents to $69.53 a barrel. Despite these gains, they barely made up for the substantial losses seen last week. Brent had ended the week over 7% lower, while WTI recorded an 8% decline. These were the steepest weekly losses for both contracts since early September, largely due to concerns over China’s slowing economic growth and diminishing risk premiums related to Middle Eastern tensions.
In Singapore, Saudi Aramco’s CEO expressed continued optimism about China’s oil demand. He highlighted that the Chinese government is implementing stronger policy measures to stimulate growth, including increased demand for jet fuel and chemicals. On Monday, China cut its benchmark lending rates, a move widely expected as part of a broader effort to reinvigorate the country’s economy. However, concerns about China’s oil demand remain after Friday’s data revealed the country’s slowest economic growth since early 2023 in the third quarter.
Meanwhile, U.S. President Joe Biden remarked on Friday that there could be a potential opportunity to address tensions involving Israel and Iran, hinting at a possible temporary resolution to the ongoing conflict. Over the weekend, however, the situation in the Middle East escalated as Israel prepared to target sites in Beirut linked to Hezbollah’s financial operations.
On the supply front, U.S. energy firms continued to reduce their oil and natural gas rig counts. For the fourth time in five weeks, the number of active rigs dropped, with Baker Hughes reporting a decrease by one, bringing the total to 585 rigs. This decline further highlights the cautious approach of U.S. energy producers amid the shifting market conditions.
Union Jack Oil plc (LON:UJO) is an oil and gas company with a focus on onshore production, development, exploration and investment opportunities within the United Kingdom and the United States of America hydrocarbon sector.
