HG MARKETS:

Oil prices declined on Monday following a weaker-than-anticipated stimulus announcement from China, which disappointed investors hoping for a boost in fuel demand from the world’s second-largest oil consumer. Brent crude futures dropped by $1.10, or 1.5%, to $72.77 per barrel, while U.S. West Texas Intermediate (WTI) crude fell by $1.21, or 1.7%, to $69.17 per barrel.

The decline extended as concerns over potential supply disruptions from a U.S. storm eased, adding to the disappointment from China’s stimulus measures. China, long regarded as the primary driver of global oil demand, has shown minimal consumption growth in 2024 due to a slowing economy, reduced gasoline consumption linked to electric vehicle adoption, and a shift towards liquefied natural gas (LNG) for trucking instead of diesel.

Additional downward pressure on oil prices came as risks of supply disruption from storm Rafael in the U.S. Gulf of Mexico diminished. While over 25% of Gulf oil and 16% of natural gas production remained offline on Sunday, Shell and Chevron announced plans to redeploy personnel to Gulf platforms to resume operations.

Looking ahead, market uncertainty has been fueled by speculation around policies expected under U.S. President-elect Donald Trump, whose administration may implement tighter sanctions on OPEC members Iran and Venezuela, potentially constraining global oil supply. This speculation contributed to a 1% gain in oil prices last week.

Oil markets are also finding support in robust demand from U.S. refiners, who are likely to operate at over 90% of their crude processing capacity due to low inventories and growing demand for gasoline and diesel, according to industry executives.

Meanwhile, the U.S. Dollar Index (DXY)—which measures the dollar’s performance against six major currencies—extended gains on Monday following weekend news that President-elect Trump had secured an additional swing state. With Republicans just four seats short of a majority in the House after clinching the Senate, attention is now focused on the upcoming Consumer Price Index (CPI) data release on Wednesday.