Oil Prices Fall as Hurricane Rafael Impact Recedes and China Stimulus is Weighed
In the world of oil trading, Friday brought a wave of news that caused prices to fall as fears over Hurricane Rafael’s impact on US Gulf oil and gas infrastructure lessened and investors considered the effects of Chinese economic stimulus.
Brent crude oil futures took a hit, losing 93 cents, or 1.23 percent, to reach $74.70 a barrel by 5:15 p.m. Saudi time. Meanwhile, US West Texas Intermediate crude dropped $1.05, or 1.45 percent, to $71.31.
Although Thursday saw gains of nearly 1 percent, both Brent and WTI are still set to finish the week 2 percent higher, with a keen eye on how the policies of incoming US President Donald Trump may influence oil supply and demand.
The US National Hurricane Center reported that Hurricane Rafael, which had caused the shutdown of 391,214 barrels per day of US crude oil production, is expected to weaken and move away from US Gulf coast oilfields in the coming days.
Adding to the downward pressure on prices was data revealing a 9 percent decline in crude imports in China, the world’s largest oil importer, in October — marking the sixth consecutive month of year-on-year decline.
Commerzbank analyst Carsten Fritsch attributed the drop in Chinese oil imports to decreased demand resulting from slow economic growth and the rise of electric vehicles.
As China announced a new round of fiscal support on Friday to alleviate debt repayment burdens for local governments, the nation’s economy continued to grapple with deflationary pressures, weak domestic demand, a property crisis, and financial strains on local governments.
Despite the stimulus measures, UBS analyst Giovanni Staunovo noted a sense of disappointment among investors as they had hoped for more direct actions to boost domestic demand.
Thursday’s price surge was driven by expectations of forthcoming actions from the Trump administration, such as stricter sanctions on Iran and Venezuela that could impact global oil supply.
PVM analyst John Evans suggested that oil prices could see a short-term increase if President Trump swiftly implements oil sanctions.
US Federal Reserve Chair Jerome Powell stated on Thursday that Trump’s proposed policies, including tariffs, deportations, and tax cuts, would not have an immediate impact on the US economy. However, the Fed would begin assessing the effects of these policies on inflation and employment goals.
To cap off the day, the Fed cut interest rates by a quarter of a percentage point in response to the changing economic landscape.