Crude Stronger Ahead Of Payrolls, Fundamentals Remain Negative

Oil prices are up around 1.5% during APAC trading ahead of the US payroll report later as signals suggest the market is oversold. They look like they will again post a weekly decline though driven by oversupply concerns. Brent has broken above $75/bbl and is currently at $75.31, and WTI is above $70 at $70.40. The USD index is 0.1% lower.

• While supply has been the focus since OPEC’s decision last week, demand is also posing risks to the market. US recession concerns persist and a Bloomberg survey is showing expectations that China’s crude consumption will grow by 500kbd in 2024, less than a third of this year’s rise.
• Russian Urals prices have fallen below the $60 price cap. Last month Russia’s output exceeded what it had promised.
• Brent is now down over 17% since mid-September and this is feeding through to fuel prices, which we are already seeing in lower headline CPI data.
• There is now a significant risk to the easing of oil & gas sanctions on Venezuela, as it acts to illegally take territory in Guyana.
• Later the key data are the November US payrolls which are expected to rise 183k with the unemployment rate remaining at 3.9%. There will also be Michigan consumer sentiment and inflation expectations. The ECB’s de Guindos will attend the ECOFIN meeting.