Brent prices declined during the first week of December as OPEC+’s decision to support prices to change downward trend proved insufficient, and economic data from both the US and China added further downward pressure.
The International benchmark Brent crude traded at $71.24 per barrel at 3.13 p.m. local time (1213 GMT) on Friday, down by around 1.5% relative to the closing price of $72.34 a barrel last week.
West Texas Intermediate (WTI), the American benchmark, traded at $67.38 a barrel at the same time on Friday, a decrease of about 1.6% from last Friday’s session, which closed at $68.47 per barrel.
Oil prices fell following the outcome of the 38th OPEC and non-OPEC ministerial meeting on Thursday, where the group confirmed that its 2 million barrels per day (bpd) production cut would be extended until December 31, 2026.
As part of the adjustments, the group also confirmed that the total production from its member countries will be capped at 39.725 million bpd in 2025 and 2026. Furthermore, some countries voluntarily agreed to extend their individual cuts of 1.65 million bpd until the end of 2026. Saudi Arabia, Russia, Iraq, the United Arab Emirates (UAE), Kuwait, Kazakhstan, Algeria, and Oman collectively committed to a 2.2 million bpd production cut, which will remain in effect until March 2025.
The next meeting of the OPEC+ group will take place on May 28, 2025.
In addition to OPEC+ decisions, economic data from the US and China contributed to the downward pressure on oil prices.
In the US, the number of first-time unemployment claims increased by 9,000 to 224,000 last week, surpassing market expectations of 215,000. This uptick, as reported by the US Department of Labor on Thursday, raised concerns about economic slowdown in the world’s largest oil consumer.
Moreover, in China, economic growth showed signs of further deceleration. The country reported a 4.8% expansion for the first nine months of 2024, falling short of its 5% annual growth target.
The official Purchasing Managers’ Index (PMI) for China, a key indicator of economic activity in the services sector, fell by 0.5 points month-on-month, signaling renewed pressures on the broader economy. The non-manufacturing PMI, which tracks the services sub-index, remained flat at 50.1, pointing to a lack of significant momentum in the sector.
These persistent signs of weak domestic demand and ongoing deflationary pressures in the world’s largest oil importing country are dampening oil demand expectations.
However, analysts expectations that China could implement economic stimulus measures to support growth have helped limit further price declines.
Rising expectations that the US Federal Reserve (Fed) might cut interest rates this month also supported prices.
On the other hand, in the US, rising expectations that the Federal Reserve (Fed) might reduce interest rates in December have also provided some support for oil prices.
After Fed Chairman Jerome Powell noted that the strong state of the US economy allows for a more cautious approach to rate cuts, the market is closely watching the upcoming non-farm payroll data for further clues about the Fed’s future monetary policy. The probability of a 25-basis-point rate cut by the Fed at its December 18 meeting remains high, currently at 72%.
