Oil prices have dipped this morning as expectations of jet fuel demand ease as the summer travel period comes to an end, alongside continued concerns over China’s uncertain economic outlook.
Brent Crude is down 0.7 percent – dipping back below the $90 threshold at $89.97 per barrel – while WTI Crude has slipped 0.77 percent to $86.86 per barrel in early trading.
This follows seven consecutive sessions of gains across both benchmarks, with prices propped up by extended cuts from leading oil producers Russia and Saudi Arabia amid sustained output reductions from OPEC, the world’s most influential oil cartel.
The two countries have extended voluntary supply cuts to the year-end, on top of the April cuts agreed by several OPEC and its extended alliance (OPEC+) running to the end of 2024 – representing an over five percent reductions in global supplies.
This comes amid declining travel and aviation demand as the summer holiday season comes to an end across Western markets.
Bjarne Schieldrop, chief commodity analyst at SEB, said he believed that market sentiment was still highly influenced by Russia and Saudi Arabia’s policy decisions, which investors were struggling to read.
“The market is bewildered and cannot quite figure out whether the latest extension of Saudi Arabia’s unilateral cut to the end of the year is 1) A reflection of weakness to come and an effort to pre-emptively avoid the oil price from falling below $85 per barrel amid coming weakness, or 2) An effort to drive the oil price to $100-110 per barrel by the end of the year,” he said.
Forecasting future price movements, he added: “If the IEA’s latest calculations for global demand in the third quarter and fourth quarter are correct and Saudi sticks to its cuts then global inventories will indeed decline by 250m barrels by year end and Brent crude will rally to $100-110 per barrel.”
However, mixed market data from China is weighing down the prospect of further rallies, with exports dropping 8.8 per cent in August year-on-year, although crude imports have climbed 30.9 per cent.
Craig Erlam described oil prices as “steady”, following a sustained period of gains which had seen Brent Crude peak at seven month highs last week.
“The Chinese data this morning may have stood in the way of further gains so far today but it will be interesting to see whether it can add to recent gains after rising to 2023 highs in recent weeks,” he said.
Official inventory data from the US Energy Information Administration due out later today could reverse this morning’s slide, with the potential for further reductions in the country’s inventories.
ADVERTISEMENT
By Nicholas Earl via CityAM
More Top Reads From Oilprice.com:
- China’s Influence In Oil Markets Grows With BRICS Expansion
- From Boom To Gloom: China's Economic Momentum Dips
- U.S. Solar Capacity Additions To Hit A Record High In 2023
