By Oil prices were headed for a weekly loss on Friday as concerns over weakening demand from China weighed on prices.
For the week, Brent prices on the Intercontinental Exchange were down by 3% from last week.
In the case of West Texas Intermediate, prices have fallen 4% so far.
At the time of writing, the WTI crude oil was $67.95 per barrel, down 1.1%, while Brent was also down 1.1% at $71.77 per barrel.
Apart from concerns over demand from China, a strengthening dollar has also put pressure on oil this week.
A stronger dollar makes oil more expensive for overseas buyers, which limits demand for the fuel.
Additionally, a rise in US crude oil stockpiles last week has also pressurized prices on Friday.
According to the US Energy Information Administration’s data, oil stockpiles in the country rose by 2.1 million barrels in the week ended November 8.
This was significantly higher than expectations of a 400,000-barrel rise.
China demand slips
Oil refiners in China, the top importer of oil, processed 4.6% less crude in October than the corresponding period last year, according to data from the National Bureau of Statistics.
The reason behind the less processing was plant closures and reduced operating rates at smaller independent refineries.
According to Commerzbank AG’s calculations, crude processing was down for the seventh consecutive month in October.
Meanwhile, China’s factory output last month slowed and concerns about the faltering property sector remained in place.
Last week, the country’s National People’s Congress announced a stimulus package worth $1.4 trillion, which failed to ignite any hope of a meaningful recovery in the economy among traders.
Oil weighed down by gloomy outlooks
Prices also fell this week as major energy organizations cut their forecasts for growth in global oil demand.
On Tuesday, the Organization of the Petroleum Exporting Countries trimmed its forecasts for growth in global oil demand for both 2024 and 2025.
The agency slightly cut its estimates for 2024 by 107,000 barrels per day and for 2025 by 103,000 barrels a day.
It now sees demand expanding by an average of 1.8 million barrels a day and 1.5 million barrels per day for 2024 and 2025 respectively.
Though OPEC cut its forecasts, it was still quite high. The International Energy Agency, in contrast, expects demand to grow by short of 1 million barrels per day for both this year and the next.
Carsten Fritsch, commodity analyst at Commerzbank, said in a report:
The IEA thus remains much more pessimistic than OPEC. This is also visible in the implicit market balance.
Short-term risk to Iran’s oil supply
Commerzbank believes that though the oil market has been weighed down by negative factors and a strengthening dollar this week, the impact of the greenback remained limited.
“This is because there are other direct ‘Trump effects’ to consider in the oil market,” Barbara Lambrecht, analyst at Commerzbank, said.
“In the short term, there is the risk of tighter sanctions against Iran.”
Trump is widely expected to enforce stricter compliance of sanctions on Iran’s oil exports, while also imposing tougher sanctions on the country.
This could wipe out around 1 million barrels per day of oil from the market, which will be bullish for prices in the short term.
Lambrecht said that in the upcoming ministerial meeting of the OPEC+, the group will discuss the possibility of more sanctions on Iran’s oil exports.
Iran is one of the top producers of crude oil in the OPEC+ group.
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