Oil Prices Fall on China Stimulus Woes, Supply Outlook

Oil prices fell by more than 2 percent on Monday as the market overlooked China’s latest stimulus plan while supply looked set to rise in 2025.

Brent crude futures settled at $71.83 a barrel, down $2.04 or 2.76 percent, while the US West Texas Intermediate (WTI) crude futures finished at $68.04 a barrel, down $2.34 or 3.32 percent.

The market was not impressed with China after it unveiled a 10 trillion yuan ($1.40 trillion) debt package on Friday to ease local government financing strains and stabilise flagging economic growth.

This disappointed investors who were seeking demand growth in the world’s second-biggest oil consumer.

Also, consumer prices in China rose at the slowest pace in four months in October while producer price deflation deepened.

Market analysts noted that Chinese economic momentum remains negative and could be worse with US President-elect Donald Trump possibly implementing tariffs up to 60 per cent on imported goods from the country.

The tariffs will further shrink profits, hurting jobs, investment and growth in the process and would also worsen China’s industrial overcapacity and the deflationary pressures it fuels.

Mr Trump’s US election victory also continues to affect the market, lending support to the US Dollar.

A stronger Dollar makes commodities denominated in the US currency, such as oil, more expensive for holders of other currencies and tends to weigh on prices.

Market watchers also identifies the possibility of an increase in oil supply from producers that do not belong to the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+ also pressured the market.

Bank of America Securities said in a note on Monday that non-OPEC crude supply was expected to grow by 1.4 million barrels per day in 2025 and 900,000 barrels per day in 2026.

“Meaningful non-OPEC growth next year and an unconvincing Chinese stimulus package likely mean inventories will swell even without OPEC+ increases,” Bank of America noted.

In late September, OPEC+ said it would boost supply in December by 180,000 barrels per day but earlier this month an agreement was reached among the member and allied countries to postpone the supply expansion until January.

Meanwhile, the US offshore production regulator said 25.7 per cent of crude oil production and 13 per cent of natural gas output remained shut because of Hurricane Rafael.