Oil Prices Volatility Spikes as Demand Concerns Clash With Geopolitics

This week, crude oil (WTI) prices experienced substantial volatility, with light crude gapping sharply lower on Monday before clawing back the losses and edging marginally higher as of Friday.

A confluence of factors—including demand signals, geopolitical uncertainties, and OPEC+ policy considerations—drove these price movements.

Demand Concerns Dominate Monday’s Steep Decline

The week began with a steep drop in crude prices as traders reacted to ongoing concerns about demand. In early trading Monday, crude oil futures slipped nearly 6%, a move compounded by worries of sluggish growth in Asia and doubts over winter fuel demand. China’s demand for crude, historically a pillar of global oil consumption, remained underwhelming. Despite governmental efforts to inject stimulus into its economy, imports fell short of market expectations, deepening fears that China’s recovery may take longer to materialize. These concerns were amplified by recent economic data suggesting weakened industrial activity across key Asian markets.

SPR Replenishment Plan Offers Temporary Market Support

On Tuesday, light crude prices received a minor lift when the U.S. Department of Energy announced a plan to replenish its Strategic Petroleum Reserve (SPR) by purchasing up to 3 million barrels for delivery through May 2024. Although limited in scale due to budgetary constraints, the plan provided a stabilizing effect.