World oil prices sluggish, demand continues to slow down

Jakarta,- Crude oil prices were observed to weaken on Monday (11/3/2024), continuing their correction since trading last weekend as the market is still nervous about slowing demand and has largely passed the prospect of tighter supply in 2024.

As of 10:57 WIB, the price of Brent crude oil weakened 0.66% to US$ 81.54 per barrel, while for light sweet or West Texas Intermediate (WTI) corrected 0.72% to US$ 77.44 per barrel.

Modest inflation data from China added to concerns over slowing demand in the world's largest oil importer, especially as oil import data for the first two months of 2024 was largely disappointing.

Data released at the end of last week showed that China's consumer price index (CPI) increased slightly in February, rising to 0.7% on an annual basis (year-on-year/yoy) and growing 1% on a monthly basis (month-to-month/mtm), from 0.8% contraction (yoy) and 0.3% growth (mtm) in January.

The slight increase in China's inflation last month benefited from increased spending during the Lunar New Year holiday.

However, China's producer price index (PPI) shrank more than expected during the period, aka China's PPI still experienced deflation, which became a contraction of 2.7% last February, signaling that China's largest economic driver is still largely under pressure.

The reading follows improved import data from China last week. China imported 10.74 million barrels per day in the January-February period, up 3.3% year-on-year, but down from 11.39 million barrels per day in December 2023, government data showed.

China also set a disappointing gross domestic product (GDP) target in 2024, and has so far given little hint of stimulus measures planned to support economic growth.

Concerns over weak demand are exacerbated by persistent uncertainty over the path of US interest rates, as last Friday's non-farm payrolls (NFP) data showed that US employment remains largely resilient.

On the other hand, concerns over sluggish demand largely offset market expectations of reduced supply this year, even after the Organization of the Petroleum Exporting Countries (OPEC+) said it would maintain the current pace of production cuts.

Disruptions in the Middle East are also expected to continue, as talks on the Israel-Hamas ceasefire failed.

Markets are now focusing on key US CPI data due on Tuesday local time, for further clues on the interest rate path of the US central bank (Federal Reserve/The Fed).

Fed officials had warned last week that inflation will largely determine when the central bank starts cutting rates in 2024.

The warning, coupled with stronger-than-expected NFP data in February, kept markets on the verge of higher hikes for a longer period of time.

Tuesday's CPI reading is expected to show that inflation is still well above the Fed's annual target of 2%, providing little impetus for the superpower central bank to cut rates.

Sources : Mar 11.24

in Oil