Oil Prices Decline Over 2% Amid Market Concerns

By Shariq Khan
Date: Nov. 8
Location: New York

Oil prices settled more than 2% lower on Friday as traders grew less concerned about prolonged supply disruptions caused by Hurricane Rafael in the U.S. Gulf of Mexico. Additionally, China's recent economic stimulus packages failed to meet market expectations.

U.S. West Texas Intermediate (WTI) futures led the decline, settling at $70.38 per barrel, down 2.7% or $1.98. Meanwhile, global benchmark Brent crude futures fell by 2.3%, or $1.76, to $73.87 per barrel.

Energy producers shut in more than 23% of oil output in the Gulf to prepare for Hurricane Rafael. However, updated forecasts have diminished concerns regarding the storm's threat to oil production. According to Alex Hodes, an analyst at StoneX, "Threats of supply outages due to Hurricane Rafael are subsiding as the storm shifts to circling in the center of the Gulf of Mexico for the next five days or so."

The hurricane had previously caused significant damage in Cuba and was downgraded to a Category 2 by the U.S. National Hurricane Center.

On the other hand, the latest fiscal support measures from top oil importer China did not suffice to lift confidence among oil investors. The announced package aimed to alleviate debt burdens for local governments but did not directly address demand concerns. UBS analyst Giovanni Staunovo remarked, "I guess some market participants were hoping for more stimulus measures coming from China. Hence, the disappointment weighing on prices earlier today."

Deflationary trends in the Chinese economy have impacted oil prices throughout the year, with October data revealing a sixth consecutive month of year-over-year declines in crude oil imports.

Despite Friday's losses, oil prices recorded an overall gain of over 1% week-over-week, bolstered by expectations of stricter U.S. sanctions on Iran and Venezuela, potentially reducing global oil supply. Additionally, the Federal Reserve's recent decision to cut interest rates by a quarter percentage point may have contributed to the prior rise in oil prices.