By Adedapo Adesanya
The price of Brent was down by 82 cents or 0.98 per cent to $83.21 per barrel on Wednesday as demand woes outweighed optimism around a larger-than-expected drop in crude stocks in the United States.
Also, the price of the US West Texas Intermediate (WTI) crude was down by 75 cents or 0.9 per cent to $78.89 per barrel in the midweek session.
The Energy Information Administration (EIA) reported an inventory draw of 6.1 million barrels for the week to August 18 compared with a decline of a substantial 6 million barrels for the previous week, which followed a build of almost identical size for the week before that.
At 433.5 million barrels as of August 18, the US commercial crude oil inventories are 2 per cent below the five-year average for this time of the year, the EIA said.
Meanwhile, US petrol (known as gasoline) stocks climbed 1.5 million barrels last week. This showed that demand hasn’t been very strong due to tough economic conditions in the world’s largest economy.
Pressure also came as manufacturing data from a host of purchasing managers’ index (PMI) surveys painted a grim picture of the health of economies across the world. For instance, factory activity shrank in Japan for a third straight month in August. Eurozone business activity also declined more than expected, particularly in Germany. Britain’s economy looked looks set to shrink in the current quarter, in danger of falling into recession.
In the US, the Composite PMI index, which tracks manufacturing and service sectors, fell to a reading of 50.4 in August from 52 in July, the biggest drop since November 2022. While August’s reading was the seventh straight month of growth, it was only fractionally above the 50 level, separating expansion and contraction as demand weakened for both manufactured goods and services.
Prices also remain bound by worry about another US rate hike and China’s economic indicators. These two concerns are expected to outweigh tightening supply from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) in the short term.
On the supply side, Iran’s crude oil output will reach 3.4 million barrels per day by the end of September, the country’s oil minister, even though US sanctions remain in place.
Saudi Arabia will likely roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October, market analysts said, amid uncertainty about supplies and as the kingdom targets drawing down global inventories further.
