Adedapo Adesanya
By Adedapo Adesanya
The prices of Brent crude futures and the US West Texas Intermediate (WTI) crude futures went down by about 1 per cent on Monday after six straight weekly gains.
The decline posted by the crude oil benchmarks occurred as investors braced for weaker demand from China and the United States, the world’s two biggest economies.
Brent shed 90 cents or 1.04 per cent to trade at $85.34 a barrel and WTI depreciated by 88 cents or 1.06 per cent to quote at $81.94 a barrel.
In China, lower-than-expected demand put a lid on prices after the country’s economy had been expected to rebound due to the lifting of COVID-19 restrictions.
The Asian nation has registered some lacklustre economic data in recent weeks, with factory gate prices falling at the fastest pace in more than seven years in June, according to recent figures.
Chinese economic data this week will be in focus as the market seeks to gauge the country’s appetite for more stimulus measures to support the world’s second-largest economy.
In the US, the summer driving season is winding down after optimism was running high with rising retail prices at the beginning of the summer driving season, leading to declines in inventories and higher refinery runs.
The natural end to the peak of the summer driving season is now weighing on the market, with lower demand for gasoline (petrol) set to lead to lower demand for crude oil.
Investors will also monitor the US consumer price index reading on Thursday for clues on the Federal Reserve’s monetary policy path.
In June, the International Energy Agency (IEA) warned in its medium-term oil market report that global oil demand would rise by 6 per cent between 2022 and 2028, reaching 105.7 million barrels per day.
However, the IEA also noted that “despite this cumulative increase, annual demand growth is expected to shrivel from 2.4 mb/d this year to just 0.4 mb/d in 2028, putting a peak in demand in sight.”
A prolonged end to the oil price rally should balance out fears of tighter supply due to Saudi Arabia’s oil output restrictions and news that the Organisation of the Petroleum Exporting Countries (OPEC) production dropped by more than 1 million barrels per day in July.
Saudi Arabia, the world’s top oil exporter, last week extended its production cut to the end of September and said more could follow.
In line with production cuts, Saudi Aramco on Saturday raised the official selling prices for most grades it sells to Asia for a third month in September.
Russia added to the supply tightness with an announcement it will cut oil exports by 300,000 barrels per day in September.
