Oil Slumps for 4-Week Straight Amid Weak Demand Outlook
The prices of crude oil ended negative for the fourth week due to demand concerns in one of the world’s largest consumer, China, and Strong US dollar.
Brent fell by 1.1% week on week to $79.41 per barrel from $80.28 a barrel on Friday last week. West Texas Intermediate (WTI) ended the week at $76.25 a barrel from $77.16 per barrel week on week. Prices declined over the week due to data indicating a slowdown in economic recovery in China, the world’s biggest oil importer.
China is important for the global oil balance. commodities strategist said in a note as it is expected to make up more than 50% of global oil demand growth in 2024. A slower-than-expected growth can dramatically change the balance, analysts said.
China’s gross domestic product (GDP) increased by 4.7% in the second quarter of 2024, less than the market’s projections, following a decline in oil imports, according to official data.
Uncertainty over oil demand in the country fueled market players’ fears that imports and refining activity could also remain low, put downward pressure on prices.
Mid-week developments related to the assassination of the head of the Palestinian Hamas group’s political bureau and rate cuts by some central banks offset the fall in oil prices.
Ismail Haniyeh, the head of the Palestinian Hamas group’s political bureau was assassinated by an Israeli airstrike in Tehran early Wednesday.
Despite cease-fire talks, rising geopolitical tensions in the oil-rich region supported price increases by fueling supply risk in the markets.
Meanwhile, some major Central Banks’ decision to reduce interest rates lent upward support to oil prices during the week by supporting strong economic activity expectations and higher oil demand.
US Federal Reserve Chair Jerome Powell hinted on Wednesday at the possibility of an interest rate cut in September that investors had much hoped for.
The Bank of England cut the bank rate by 25 basis point from 16-year high to 5%, as widely expected. Moreover, the European Central Bank is expected to cut interest rates again in September with a 95% probability despite mixed inflation data.
Oil prices have come under further pressure as bearish sentiment has hit not just oil but large parts of the commodity complex, leading to a large amount of speculative selling.
In the previous week, Brent, WTI fell, leaving the market below $80 per barrel for the first time since early June. Weak Chinese demand remains the driver for the oil market, following a raft of fairly bearish data in recent weeks. #Oil Slumps for 4-Week Straight Amid Weak Demand Outlook
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