Mixed Signals Emerge in Base Oil and Fuel Markets Amid Inventory Data and Demand Concerns

Key Highlights:

• Oil Prices: Brent crude settled at $73.25, and WTI at $69.60, with minor weekly gains of 0.4% and 0.2%, respectively, supported by hopes of China's economic stimulus.
• U.S. Inventories: Crude stocks fell by 3.2 million barrels, below forecasts, reflecting softer U.S. demand; gasoline stocks rose, while distillate inventories declined.
• Global Projections: OPEC+ and EIA revised oil demand growth lower for 2024, with a surplus expected in 2025 due to non-OPEC+ supply growth.
• Expert Insights: Optimism surrounds China's fiscal strategies, but market volatility persists as weaker global demand may cap price gains.

Oil Prices Stay Steady Amid China Recovery Hopes

• Oil prices were little changed on Friday but were set for a weekly rise amid optimism that economic stimulus efforts will prompt a recovery in China, the world's biggest oil importer.
• Brent crude futures fell 1 cent to $73.25 a barrel by 0145 GMT. U.S. West Texas Intermediate crude was at $69.60, down 2 cents, from Thursday's close. However, on a weekly basis, Brent was up 0.4% while WTI rose 0.2%. MCX Crude oil prices opened at 5979 with a gain of 0.05%.

U.S. Crude Inventory Data Signals Slower Demand

• The American Petroleum Institute (API) has released its weekly report on crude oil stocks, revealing a decrease in inventory levels. The report shows a reduction of 3.2 million barrels, which is less than the previous week's decline of 4.7 million barrels.
• This decrease in crude inventories, although significant, is less than what was forecasted. Analysts had expected a sharper decline, similar to or greater than the previous week's drop. 
• The smaller-than-expected reduction suggests that demand for crude oil in the US may be weaker than anticipated.
• Comparing the actual number to the forecasted number, the decrease of 3.2 million barrels falls short of expectations. The less-than-expected decline indicates that the demand for crude oil is not as strong as was previously estimated. This could potentially be bearish for crude prices, as a smaller reduction in inventories implies a lower demand.
• When compared to the previous week's numbers, the reduction of 3.2 million barrels is also less than the 4.7 million barrels decrease reported. 
• This further suggests that the demand for crude oil may be slowing down, as the decrease in inventory levels is not as steep as it was in the previous week.

Global Forecasts Point to Weaker Oil Demand Ahead

• Crude oil prices settled slightly lower by 0.07% at ₹5,976, weighed by uncertainties about global demand and potential oversupply. 
• While U.S. crude inventories dropped by 3.2 million barrels according to API data, official data confirmed a smaller-than-expected draw of 934,000 barrels, disappointing market expectations. 
• Gasoline stocks rose by 2.348 million barrels, aligning with forecasts, while distillate fuel stocks saw a sharp decline.
• China's crude imports are projected to peak by 2025, according to Sinopec, as demand for gasoline and diesel weakens. Meanwhile, OPEC+ has reduced its global oil demand growth forecast for 2024 for the fifth consecutive month, and JPMorgan (NYSE:JPM) predicts a surplus of 1.2 million barrels per day in 2025 due to non-OPEC+ supply growth. 
• The U.S. Energy Information Administration (EIA) revised global demand growth estimates to 1.2 million barrels per day in 2024, 300,000 barrels lower than earlier forecasts, citing weaker economic activity in China and North America.

Expert Opinion: Cautious Optimism Amid Volatile Trends

• Market players are feeling cautiously upbeat, with China’s fiscal blueprint suggesting a possible demand uptick. The dip in US crude stocks supports this sentiment, likely propping up oil prices short-term. 
• Still, investors should keep a keen eye on inventory data and shifts in global economic plans. 
• Expected crude inventories fell by about 1.9 million barrels in the week to Dec. 20, while gasoline and distillate inventories are seen falling by 1.1 million barrels and 0.3 million barrels respectively.