Oil heads for fourth weekly drop amid demand woes

August 02, 2024 (MLN): Oil prices edged up on Friday but are still headed for a fourth weekly drop as demand concerns in the world’s two biggest economies overshadowed heightened geopolitical risk.

Brent crude traded above $80 a barrel after plunging 1.6% on Thursday.

While West Texas Intermediate crude (WTI) traded near $77 per barrel.

Factory gauges in the US and China both showed a contraction on Thursday, indicating signs of weakness in manufacturing, Bloomberg reported.

Crude had jumped on Wednesday after the killing of Hamas and Hezbollah leaders led to heightened tensions in the Middle East.

“Demand concerns are shuffling back to the center stage,” said Vandana Hari, founder of Vanda Insights in Singapore. “Any knee-jerk geopolitical risk premium in crude is always susceptible to correction in the cold light of day.”

Oil is set for its longest streak of weekly declines since December, as concerns linger about consumption in No. 1 importer China and as OPEC+ is set to increase production from next quarter — a plan it reiterated at a monitoring meeting on Thursday.

Still, futures remain modestly higher this year, helped by expectations that monetary easing in the US will boost consumption, with Federal Reserve Chair Jerome Powell saying an interest rate cut could come as soon as September.

Widely watched market metrics are also signaling less tight conditions.

Despite still holding in a bullish, backwardated structure, the gap between Brent’s two nearest contracts has narrowed.

The spread was last 60 cents a barrel in backwardation, compared with more than $1 two weeks ago.

(Header image generated with AI)

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