WTI Breaks Below $70 as Demand Concerns Drive Bearish Sentiment

West Texas Intermediate broke below $70 per barrel on Monday as Hurricane Rafael weakened to a storm that is unlikely to cause any damage to U.S. oil production in the Gulf of Mexico.

Separately, oil benchmarks got depressed by trader pessimism about Chinese oil demand after the country’s ruling party announced its latest stimulus package, which underwhelmed, according to Reuters.

At the time of writing, Brent crude was trading at $73.30 per barrel while WTI had dropped to $69.69 per barrel.

“The market will now shift focus to the Politburo meeting and Central Economic Work Conference in December, where we expect more pro-consumption countercyclical measures to be announced,” ANZ analysts wrote about China. Beijing on Friday announced additional stimulus measures that focused on the real estate sector and consumer demand for goods. Apparently, this was not good enough for oil analysts.

“The crude market has hit a fair value and feels incredibly comfortable at the $70 level,” Chris Weston, head of research at Pepperstone Group, told Bloomberg. “Granted, we have US election risk that could impact growth expectations, but we’re not expecting that battle to bite and impact this week.”

China, of course, remains in the focus of traders’ attention as the second-biggest consumer of the commodity and top importer. Just last week, Vitol’s head of research noted that this focus will remain in place as China continues to drive growth in oil demand thanks to petrochemicals. These, Giovanni Serio said, will replace transport as the main source of demand growth in the coming years.

“The growth just next year is entirely capable of satisfying the total demand globally for plastics,” Serio said at the FT Asia Commodities conference, as quoted by Reuters. “There is no doubt that this is going to be the driving force of oil demand in China and globally because it is less of a decarbonisation story in that space,” he added.