SINGAPORE: Oil prices dropped on Friday due to indications that demand in China, the world's largest crude importer, is still lagging behind expectations amid its uneven economic rebound.
Brent crude futures decreased by 65 cents, or 0.9 percent, to $71.91 per barrel at 7:50 a.m. Saudi time. Meanwhile, US West Texas Intermediate crude futures fell by 62 cents, or 0.9 percent, to $68.08.
For the week, Brent is expected to decline by 2.7 percent, while WTI is set to drop by 3.3 percent.
"While oil prices have stabilized around the $71.00 support level this week, the absence of a strong bullish catalyst suggests that price recovery remains weak for now," said Yeap Jun Rong, market strategist at IG, in an email.
The potential for increased supplies from the US and OPEC+ combined with uncertainties over China's economic recovery continue to be a concern, while the chances of a December rate cut are now "close to a coin toss" under a less dovish Federal Reserve, Yeap added.
China's oil refiners processed 4.6 percent less crude in October compared to the same period last year, marking the seventh consecutive month of year-on-year declines, according to data from the National Bureau of Statistics released on Friday. This decline occurred as some plants were shut down and operating rates at smaller independent refiners were reduced.
The drop in processing rates coincided with a slowdown in China's factory output growth last month and persistent demand issues in its real estate sector, despite an increase in consumer spending, according to government data.
Oil prices also declined this week as major forecasters suggested that market fundamentals remained bearish.
The International Energy Agency predicted that global oil supply will surpass demand by 2025 even if OPEC+ maintains its cuts, as rising production from the US and other non-OPEC+ producers outpaces sluggish demand.
The Paris-based agency increased its 2024 demand growth forecast by 60,000 barrels per day to 920,000 bpd and kept its 2025 oil demand growth forecast nearly unchanged at 990,000 bpd.
OPEC this week lowered its forecast for global oil demand growth for both this year and 2025, emphasizing weaknesses in China, India, and other regions, marking the fourth consecutive downward revision to its 2024 outlook.
US crude inventories last week rose by 2.1 million barrels, significantly more than the expected 750,000-barrel increase, according to the Energy Information Administration on Thursday.
Gasoline stocks fell by 4.4 million barrels last week to their lowest level since November 2022, contrary to analysts' expectations for a 600,000-barrel increase, the EIA reported.
Distillate stockpiles, which include diesel and heating oil, also unexpectedly declined by 1.4 million barrels, according to the data.
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