Crude Oil Prices Face Pressure from Weak Demand and Geopolitical Concerns

China’s Sluggish Trade Data Contributes to Oil Price Decline
Crude oil prices dropped following disappointing trade data from China, which is a major driver of global oil demand. On Tuesday, Brent crude futures declined by 0.37% to $71.9 per barrel, while WTI futures fell 0.45% to $68.06 per barrel. The market sentiment was heavily impacted by China’s November international trade data, which showed a sharp decline in imports by 3.9% and lower-than-expected export growth of 6.7%. These figures came in well below economists’ projections and underscored the ongoing weakness in domestic demand in China. This data exacerbated fears that global oil consumption will remain subdued due to the economic slowdown, particularly in China, the world’s largest oil importer.

China’s Economic Slowdown Signals Weak Demand for Oil
China’s consumer price index (CPI) also pointed to weak domestic consumption, adding to the bearish outlook for oil prices. For the first ten months of 2024, China’s oil imports fell 3.7%, signaling a reduction in the country’s demand for crude. However, November saw a slight recovery in imports, reaching 11.62 million barrels per day (bpd), the highest in four months. Despite this, analysts remain cautious, forecasting only a modest 1.7% growth in China’s oil demand for 2025. The weak economic activity in China, coupled with rising oil production in other parts of the world, suggests that any growth in Chinese demand may not be enough to significantly impact global oil prices.

OPEC+ Response to Weak Demand
OPEC+ has taken steps to address the global slowdown in demand by postponing plans to raise oil production. In response to the weak demand outlook and rising output from the United States, the organization decided to delay its production increase by three months and extended its output recovery timeline to 2026. While OPEC+ continues to manage the supply side, experts emphasize that the real driving force behind any potential oil price recovery will depend largely on the demand side, particularly China’s economic performance.

Geopolitical Tensions Provide Limited Support
In addition to weak demand data, geopolitical tensions in the Middle East have also played a role in the oil market. Conflicts in Syria, the ongoing Iran-Israel tensions, and instability in Ukraine have raised concerns over potential supply disruptions, adding some bullish sentiment to oil prices. However, despite these tensions, the upward movement in oil prices has been short-lived, as ceasefire negotiations in the Middle East and an overall calm in the geopolitical landscape have led to price stabilization.