Oil prices are on track for their fourth consecutive weekly decline as worries over demand from the world’s largest economies overshadow increased geopolitical risks. Brent crude remained close to $80 per barrel after a 1.6% drop on Thursday, while West Texas Intermediate fell below $77. The decrease follows a contraction in factory activity reported in both the US and China, signaling potential weaknesses in manufacturing.
Despite a spike in crude prices on Wednesday following the deaths of Hamas and Hezbollah leaders and subsequent Middle East tensions, demand concerns have once again taken precedence. Vandana Hari, founder of Vanda Insights, noted, “Demand concerns are coming back into focus. Any immediate geopolitical risk premium in crude is likely to be adjusted once the situation stabilizes.”
Oil prices are poised for their longest streak of weekly losses since December, driven by ongoing apprehensions about consumption in China, the world’s top oil importer. Additionally, OPEC+ plans to boost production next quarter, a decision reaffirmed at a monitoring meeting on Thursday. Nevertheless, oil futures have remained relatively steady this year, supported by expectations of US monetary easing, with Federal Reserve Chair Jerome Powell suggesting a potential interest rate cut as early as September.
Market indicators also reflect less stringent conditions, despite a continued bullish trend. The difference between Brent crude’s nearest contracts has diminished, with the spread narrowing to 60 cents a barrel in backwardation, down from over $1 two weeks ago.
