Oil prices dropped around 2 per cent on Monday, November 11, after China’s stimulus plan disappointed investors, Reuters reported.
The report added that Brent crude futures fell by 2.48 per cent or $1.83 to $72.04 a barrel at 2:44 pm (GMT), and US West Texas Intermediate crude futures declined by 2.71 per cent or $1.91 to $68.47 a barrel.
On Friday, too, the benchmark indices dropped by over 2 per cent. The US dollar index rose slightly more than its highs after the US Presidential elections on November 5. The index measures the US dollar in relation to a basket of foreign currencies. Commodities denominated in dollars, such as oil, have become expensive due to a stronger US currency.
China’s consumer prices increased at a slow pace in the last four months in October, and producer price deflation increased despite its effort to double down stimulus.
“Chinese inflation figures were again weak, with the market fearing deflation, particularly as the yearly change in the producer price index fell further into negative territory … Chinese economic momentum remains negative,” the report said, quoting Achilleas Georgolopoulos, a market analyst at brokerage XM.
The report, citing Tamas Varga, an analyst at oil broker PVM, said China’s recent stimulus package will not revive its demand for oil or imports of crude oil.
“After last week’s U.S. presidential election, attention is slowly drifting back to the underlying fundamentals,” Varga added.
The oil prices also declined on lowering concerns of possible supply disruptions due to storm Rafael in the US Gulf Mexico region.
The report, citing the offshore energy regulator, said over a quarter of oil from the US Gulf of Mexico and 16 per cent of natural gas were unavailable on Sunday.
Concerns over increase in US oil and gas production
Meanwhile, there have been concerns over the increase in US oil and gas production under the Donald Trump administration; however, the 2025 forecast of oil production is not likely to change. Trump had promised to hike import tariffs to boost the US economy.
The report said there are also concerns over stricter sanctions for OPEC countries such as Iran and Venezuela and the reduction of the oil supply to global markets. This is partly responsible for a hike in oil prices of over 1 percent last week.
