West Texas Intermediate (WTI) crude oil prices continue to experience a downward trend, trading around $72.90 per barrel during Asian trading hours on Tuesday. This decline persists despite an uptick in energy demand attributed to colder weather conditions and economic stimulus initiatives from Beijing.
The oil market could receive some support, as the Organization of the Petroleum Exporting Countries (OPEC) reported a decrease in oil production for December. This contraction was primarily led by the United Arab Emirates (UAE), which implemented significant supply cuts to stabilize the global market. Production fell by 120,000 barrels per day (bpd) to 27.05 million bpd. While there were modest increases in production from Libya and Nigeria, these gains were offset by reductions from Iran and Kuwait, according to a Bloomberg survey.
OPEC and its allies, collectively known as OPEC+, have been limiting production for several years in a bid to uplift prices, particularly amidst weak demand and plentiful supplies from the United States. In their latest meeting, they decided to postpone any plans to restore output, choosing instead to maintain existing production cuts.
On the policy front, the Biden administration is taking steps to limit new offshore oil and gas developments along most U.S. coastlines. Although this decision may be largely symbolic and is not expected to affect ongoing drilling operations, it represents a significant shift in the U.S. energy landscape. Concurrently, further sanctions targeting Russian oil revenues are anticipated in response to the ongoing conflict in Ukraine. These measures will focus on actions against tankers transporting Russian crude, as the U.S. seeks to apply more pressure on Russia’s economy.
Amidst these developments, China’s economic stimulus efforts are expected to enhance oil demand. The government has announced plans to significantly increase funding for projects through long-term treasury bonds to invigorate business investment and promote consumer spending, bolstering its position as the world’s largest crude importer.
