High oil prices hit demand, and oil sees its biggest weekly decline since March.

Zhitong Finance APP noticed that oil prices have experienced the largest weekly decline since March, as concerns about the global economy cast a shadow over demand prospects.

WTI crude oil closed at its lowest level since the end of August on Thursday, and then rose slightly to $83 per barrel. The US crude oil benchmark fell nearly 9% this week, with heavy losses on Wednesday and Thursday.

This week, oil prices fell due to poor US gasoline consumption data and an increase in gasoline inventories. This has sparked a debate about whether the previous price increases have undermined product demand, but Goldman Sachs Group said that such concerns are somewhat exaggerated.

Crude oil prices soared in the third quarter due to OPEC+ leaders Saudi Arabia and Russia curbing supply and inventory declines. However, with the escalation of macroeconomic concerns, crude oil prices have reversed in the past week and a half. Nevertheless, both Russia and Saudi Arabia have reiterated their commitment to production cuts until the end of the year, and Saudi Arabia has also raised its official selling prices.

Destruction of demand caused by high oil prices

Natasha Kaneva, head of the global commodities strategy team at JPMorgan Chase, said that the destruction of oil demand has already begun, and it is expected that oil demand will decline this quarter after a recent rebound. Kaneva said, "After reaching our target of $90 per barrel in September, our year-end target is still $86 per barrel."

The reduction in summer inventories will turn into a slight increase in the last few months of this year. In addition, in the United States, Europe, and some emerging market countries, the suppression of demand caused by rising oil prices has once again become apparent.

As oil prices continue to rise, the cost of oil and petroleum products will also increase, and these price increases may eventually be passed on to consumers, making goods and services more expensive. This may reduce people's purchasing power and reduce their demand for various goods and services, especially for products and services with higher fuel consumption, such as automotive fuel and long-distance travel.

Since Saudi Arabia reduced production in June this year, global oil supply has been tight, and gasoline prices reached a new high in 2023 in September.

JPMorgan Chase believes that consumers' tolerance for oil prices may have reached a limit:

There are already signs that consumers have responded by reducing fuel consumption. The surge in gasoline prices in the third quarter of 2023 in turn suppressed gasoline demand.

As for diesel, the report emphasizes that diesel prices have recently risen by 30%, mainly affecting construction companies, transportation companies, and farmers, increasing the cost of freight and food production.