Oil Prices Plunge to Lowest Levels Since 2021 Amid Supply Surplus Fears and Weak Economic Data

On the evening of September 10, international oil prices plummeted dramatically. Influenced by strong supply, demand concerns, and rampant speculative selling, oil prices fell yet again. WTI October crude oil futures closed down by $2.96, a decline of 4.31%, to $65.75 per barrel, marking the lowest level since last May. Meanwhile, Brent November crude oil futures closed down by $2.65, a drop of 3.69%, to $69.19 per barrel, hitting a new low since December 2021.

Analysts suggest that weak economic data have triggered market fears about oil demand from the world's two largest consumers, further intensifying concerns about a potential supply surplus next year.

Non-OPEC oil-producing countries have ramped up production, exacerbating this scenario. Speculators currently hold net long positions on crude oil at the lowest levels on record, indicating that part of the price drop is driven by significant changes in financial positions.

On September 10, US energy stocks also fell sharply, with the S&P 500 Energy Index sinking more than 2.3%, hitting its lowest point since February. Individual stocks, including ExxonMobil, Chevron, and Occidental Petroleum, saw similar declines.

Economic analysts pointed out that the main reason for the international oil price dropping below $70 per barrel is the disappointing US macroeconomic data from last week. Public data revealed that in August 2024, the increase in US non-farm payrolls rose to 142,000, which was below expectations, with manufacturing employment being the biggest drag.

Aziveh An, a senior energy and carbon neutrality analyst at Orient Securities, stated that the market is concerned about US macroeconomic data, which directly impacts oil demand, leading to a continuous decline in oil prices.

Qi Li, an investment consultant at CRDC Futures, added that the current oil market is clearly grappling with supply and demand dynamics, coupled with being in a low-demand season, which exacerbates worries about oil demand given the underwhelming US macroeconomic data. Additionally, overseas market exchange rate fluctuations also put pressure on oil prices.

Furthermore, the "OPEC+" coalition, which includes OPEC members and non-OPEC oil-producing countries, held an impromptu meeting and decided to extend the voluntary production cuts by another two months until the end of November. This implies that starting December, members will gradually exit the voluntary production cut agreement, which is expected to further increase oil supply.

On September 10, OPEC released its monthly report, forecasting that global oil demand in 2024 will grow by 2.03 million barrels per day, down from the previously estimated 2.11 million barrels per day. It also revised the 2025 demand growth forecast to 1.74 million barrels per day from 1.78 million barrels per day. In August 2024, OPEC's average daily oil production was 26.59 million barrels, down by 197,000 barrels from July, mainly due to a decrease in Libyan production. OPEC maintained its 2025 non-OPEC supply growth forecast at 1.10 million barrels per day.

The US Department of Energy reported that, starting from midnight on September 5, 2024, the domestic prices of gasoline and diesel have been reduced by 100 yuan per ton, following the recent changes in international oil prices. Since the beginning of 2024, retail price adjustments for petroleum products have occurred 18 times, with seven increases, seven decreases, and four times remaining unchanged. Taking into account the increases and decreases, the cumulative rise for standard gasoline this year is 150 yuan per ton, and for standard diesel, it is 145 yuan per ton.

Overall, the sharp decline in oil prices not only influenced international market investor sentiment but also led to a comprehensive drop in US energy stocks. Stocks of major companies like ExxonMobil and Chevron are among those affected, with ExxonMobil seeing a 3.65% dip. Investors need to keep a close eye on the upcoming economic data from the US, particularly the August inflation data, which will have significant implications for the Federal Reserve's future monetary policy. Additionally, the developments in Libyan oil supply and its impact on the global oil market's supply-demand balance will be crucial.