Oil prices throughout the week ending February 2 closed bearish or fell by 6 percent, one of the main triggers was the negative signals ahead of the regular OPEC+ meeting on February 1 which led to a split within the alliance. Apart from that, the results of the OPEC+ meeting did not decide on new production figures, but preferred to wait until next March regarding changes of the current production policy.
Meanwhile, China's economic growth is also the focus of the market this week because it has the potential to influence global oil demand, considering that China is the world's first largest oil importer and also the world's second largest oil consumer. The International Monetary Fund (IMF) on Friday (2/2) released a projection that estimates China's economic growth will slow to 4.6% in 2024 and continue to decline in the medium term to around 3.5% in 2028. The IMF noted the outlook China is highly uncertain given large imbalances such as overinvestment in infrastructure and housing. Additionally, worse-than-expected external demand and geopolitical tensions pose risks to China's economy, the IMF added.
Apart from that, the oil market are focused on monitoring the development of the situation in the Red Sea which is still heating up throughout this week, even until the end of the week the signal of escalation in Red Sea tensions is still quite strong. Attacks by the Yemeni Houthi group on ships passing through the Red Sea route forced many ship owners to choose to take new routes even though the consequences were shipping delays and increasing of fuel prices. The Red Sea route itself is the fastest shipping route connecting Asia and Europe and is used for almost 12% of global crude oil trade.
Following Saudi, 7 OPEC Members Promise to Limit Supply
At Thursday's meeting (1/2), OPEC and its allies did not discuss changes of the production policy, which will only be reviewed in March, meaning the alliance will continue to reduce production by around 900,000 bpd in the first quarter, said two delegates who attended in the meeting. To strengthen this commitment, seven OPEC members, namely Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman, promised to implement supply restrictions totaling around 900,000 bpd this quarter, along with a reduction of 1 million bpd carried out by the group's leader, Saudi Arabia, officials said on Monday (5/2). However, the market is focused on the results of the meeting of OPEC and its allies in early March whether the alliance will continue supply restrictions until the second quarter or will instead take a different decision.
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Source: ICDX Research