Adedapo Adesanya
By Adedapo Adesanya
Oil prices edged lower on Tuesday, spurred by a stronger US Dollar and signs of profit-taking.
Brent crude futures settled at $84.91 a barrel after it went down 52 cents or 0.6 per cent, as the US West Texas Intermediate (WTI) crude futures closed at $81.37 a barrel after it fell by 43 cents or 0.5 per cent.
The Dollar index, a measure of the greenback against six major currencies, rose 0.40 per cent. A stronger Dollar makes crude more expensive for investors holding other currencies.
This is coming amid predictions that global oil demand will grow in the second half of 2023 versus the first, in tandem with supply cuts to reduce global oil inventories.
The latest figures from the US, the world’s biggest fuel consumer, showed fuel demand rose to the highest level since August 2019, while estimates show US crude oil stockpiles were expected to have declined last week.
Also, British Petroleum chief executive officer (CEO), Mr Bernard Looney, at a conference on Monday, forecasted that oil demand growth would continue into next year, adding that this is supported by the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ being increasingly disciplined.
Analysts also noted that the market has held up despite worries about recession earlier in the year. This is due to the actions of central banks, which have granted investors more confidence.
Mixed signals are coming from China, the world’s largest oil importer, which is facing slow growth as supply, demand, and export orders all deteriorate, as seen in its private sector.
The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) fell to 49.2 in July from 50.5 in June, missing analysts’ forecasts of 50.3 and marking the first decline in activity since April. The 50-point index mark separates growth from contraction.
Meanwhile, the Chinese government on Tuesday pledged more financing support to small businesses.
European data released on Monday showed manufacturing activity in the eurozone also contracted in July at the fastest pace since May 2020.
On the supply side, the OPEC+ meeting will meet on Friday, August 4, and is expected to see Saudi Arabia roll its voluntary cuts through September, further tightening supplies.
OPEC oil output fell in July after Saudi Arabia made an additional voluntary cut as part of the OPEC+ producer group’s latest agreement to support the market, and an outage curbed Nigerian supply, a Reuters survey found on Monday.
Combined with production problems in Angola and Libya, the cuts contributed to an 840,000-barrels-per-day decline in OPEC’s total for July, according to the Reuters survey.
