Oil Prices Decline Amid Supply Concerns and Disappointing Stimulus

By Florence Tan
SINGAPORE (Reuters) – Oil prices extended declines on Monday as the threat of a supply disruption from a U.S. storm eased and after China's stimulus plan disappointed investors seeking fuel demand growth in the world's No. 2 oil consumer.

Brent crude futures dropped 31 cents, or 0.4%, to $73.56 a barrel by 0340 GMT, while U.S. West Texas Intermediate crude futures were at $70 a barrel, down 38 cents, or 0.5%. Both benchmarks fell more than 2% last Friday.

Beijing's stimulus package announced at the National People's Congress (NPC) standing committee meeting on Friday fell short of market expectations. IG market analyst Tony Sycamore noted the murky forward guidance hinted at only modest stimulus for housing and consumption.

ANZ analysts commented that the lack of direct fiscal stimulus suggests Chinese policymakers are assessing the impact of the policies from the next U.S. administration. They anticipate more pro-consumption countercyclical measures to be announced at the upcoming Politburo meeting and Central Economic Work Conference in December.

In 2024, oil consumption in China, traditionally a driver of global demand growth, has barely increased as economic growth slows, gasoline use declines due to the rapid rise of electric vehicles, and liquefied natural gas replaces diesel in trucks.

Oil prices eased further as concerns over supply disruption from storm Rafael in the U.S. Gulf of Mexico decreased. As of Sunday, more than a quarter of U.S. Gulf of Mexico oil and 16% of natural gas output remained offline, according to the offshore energy regulator.

Shell and Chevron announced plans to redeploy personnel to their Gulf of Mexico platforms to resume operations. Looking ahead, uncertainty from policies under U.S. President-elect Donald Trump clouds the global economic outlook. Expectations that he may tighten sanctions on OPEC producers Iran and Venezuela contributed to last week’s oil price gain of over 1%.

Meanwhile, the oil markets are supported by firm demand from U.S. refiners, who are expected to run their plants above 90% of their crude processing capacity due to low inventories and improving demand for gasoline and diesel, according to industry experts.