U.S. crude oil prices dropped by 4% on Wednesday, reaching their lowest level since late June. The West Texas Intermediate (WTI) contract for January settled at $69.38 a barrel, falling $2.94, while the Brent contract for February declined $2.90 to settle at $74.30 a barrel.
WTI Crude Oil Cash Chart
Crude Oil Brent Cash Chart
Simultaneously, retail gasoline prices in the U.S. hit their lowest point since January, averaging $3.22 per gallon, just ahead of the holiday shopping and travel season. This decline in gasoline prices followed the downward trajectory of oil prices.
Gasoline Cash Chart
OPEC+ Efforts Fail to Boost Oil Prices
Despite efforts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to boost prices, both U.S. crude and the global benchmark have fallen for five consecutive days. OPEC+ had promised to slash supply in the first quarter of 2024, but the market has remained skeptical.
Factors Contributing to Price Decline
The continuous decline in oil prices can be attributed to several factors. First, nations outside of OPEC+, particularly the U.S., have been pumping crude at an accelerated pace. Additionally, concerns about the Chinese economy have added to market worries.
Moreover, Moody’s downgraded China’s government credit rating outlook to negative from stable, exacerbating concerns about the global economy.
Mixed Picture for Demand and Supply
On Wednesday, U.S. data revealed a mixed picture for demand and supply. Crude inventories fell by 4.6 million barrels for the week ending December 1, while gasoline inventories rose by 5.4 million barrels, according to the Energy Information Agency.
The rise in gasoline stocks and the skepticism surrounding OPEC+’s commitment to supply cuts of 2.2 million barrels per day in the first quarter of 2024 have contributed to the downward pressure on oil prices.
The decline in U.S. crude oil prices, coupled with the lowest retail gasoline prices since January, reflects a complex set of factors. From concerns about the Chinese economy to increased crude production outside of OPEC+, the market is facing multiple challenges that have led to the current price decline.
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