Oil prices stabilized in Asia after losing nearly 4% yesterday, Tuesday, as rising Russian flows and US production increased concerns about excess supply.
Brent crude, the global standard, was trading near $73 a barrel, while the price of its American counterpart, West Texas Intermediate, was around $68. Russia's weekly average of seaborne crude oil exports jumped to the highest level since early July, while the United States raised its estimate for domestic crude production for this year.
Reflecting the weakness, time differences indicate that supply exceeds demand. Brent and West Texas Intermediate crude futures are in a bearish state of contango, with spot contracts trading at discounts to futures contracts, as the latest discounts on 12-month contracts were 8 cents per barrel in a state of contango, and this is the first time that the negative trend has dominated this situation. The time period is approximately one year.
Chinese consumption slows
Crude oil has fallen by about a quarter since late September, with OPEC+'s latest plan to deepen production cuts failing to stem the decline, amid doubts that coalition members will fully adhere to voluntary cuts. In addition to the bearish outlook, Chinese crude oil consumption growth is expected to slow next year, and there is also the possibility that the United States could slide into recession.
Vishnu Varathan, head of Asian economics and strategy at Mizuho Bank in Singapore, said oil faces a US-led rise in non-OPEC supplies and doubts about OPEC compliance, with some prospects of declining demand.
The Energy Information Administration stated in its monthly forecasts that US crude oil production in 2023 is expected to reach 12.93 million barrels per day, an increase of 300 thousand barrels per day from previous expectations. Separately, the American Petroleum Institute reported that oil inventories at Cushing, Oklahoma, rose by 1.4 million barrels, according to people familiar with the matter.
The Organization of the Petroleum Exporting Countries will release its monthly market report later on Wednesday, while the Federal Reserve is scheduled to make its final decision on this year's interest rate. The Paris-based International Energy Agency will publish its monthly forecasts tomorrow, Thursday.
