Oil prices drop 3% amid demand, oversupply worries

The news: Oil prices fell to their lowest level in six months overnight on concerns about oversupply and softening demand as hopes for an early rate cut by the US Federal Reserve faded.

The numbers: Brent crude futures settled at USD73.24 a barrel, down 3.7%, while US West Texas Intermediate (WTI) crude dropped to USD68.61 a barrel, down 3.8%.

The context: Crude prices fell after data showed the US consumer price index rose in November, further bolstering the view the Federal Reserve is unlikely to cut interest rates early next year. Higher rates for longer could slow economic growth and soften oil demand. Demand growth is already expected to slow in 2024 with OPEC and the International Energy Agency split on the extent. This comes amid concerns that the OPEC+ deal to curb supplies will not do enough to balance the market. US crude oil production is expected to rise by 1.02 million barrel per day to 12.93 million bpd in 2023 and by 180,000 bpd to 13.11 million bpd in 2024, the EIA said.