Oil prices struggle to maintain the positive impetus even as risk-on sentiment prevails in the global markets. Overnight, Brent crude has registered a fresh late-September high of $63.30 but failed to confirm the breakout and slipped towards the 100-DMA around $61.50. This area served as a local support on Thursday, with futures bounced back above the $62 handle.
Despite the technical picture in the weekly charts has been improving lately, the overall dynamics shows that the market feels the burden of weak demand coupled with rising US inventories. This explains a muted reaction to risk on flows in the global stock markets which received a fresh boost from China commerce ministry that expressed its readiness to negotiate on how much tariffs can be cancelled.
According to the EIA, commercial crude oil stockpiles increased by nearly 8 million barrels from the previous week, to 446.8 million barrels, which is about 3% above the five-year average for this time of year. Analysts expected the stockpiles to rise by just 1.5 million barrels. Crude oil production stayed at 12.6 million barrels per day for the fourth straight week. Output remains elevated despite a decent contraction in the number of oil rigs.
On the demand side, in its World Oil Outlook revealed earlier this week, OPEC has lowered its outlook for global oil demand growth over both the medium-term and long-term. In late-October, the International Energy Agency warned that oil markets could face excess supplies next year amid weaker demand growth coupled with production growth. So, demand concerns continue to serve as bearish driver for markets in a wider picture.
Moreover, oil traders realize that OPEC is on no hurry to deepen its output cuts. As the December meeting looms, investors are wondering if the cartel and its non-OPEC allies announce additional measures to support the global market in the face of elevated production numbers in US shale fields.