Concerns Raised Over Strength of Future Oil Demand
Recession fears remain elevated for key markets, including the U.S. and EU, raising concerns over the strength of future oil demand.
That’s what Fitch Solutions Country Risk & Industry Research analysts stated in a new report sent to Rigzone, which highlighted that the company has not changed its forecasts for Brent crude but noted that “the balance of risk to the outlook now lies largely to the downside”. The company is currently forecasting the Brent will average $105 per barrel this year and $100 per barrel in 2023.
In the report, the analysts outlined that Brent crude reached a six-month low this week, closing at $92.3 per barrel on August 16, before recovering to around $95 per barrel. Prices were said to have been weakened by a surprise interest rate cut in China in response to disappointing economic data and a slowdown in the rate of new home construction in the U.S., “which fell 9.6 percent month on month in July to its lowest level since early 2021”.
Looking at supply, the analysts noted in the report that further progress was being made on the nuclear deal with Iran.
“Washington is currently weighing Tehran’s response to an EU-backed draft agreement aimed at reviving the previous deal and both sides have indicated that they are optimistic that a compromise can be reached,” the analysts stated in the report.
“If so, over one million barrels per day of production and a large volume of stored barrels will be released back to market. With sentiment turning increasingly bearish, this could be the trigger for a renewed drop in prices,” the analysts added.
At the time of writing, the price of Brent crude oil stood at $95.50 per barrel. Prices have steadily dropped after closing over $120 per barrel on several occasions in June. The 2022 Brent crude oil price peak, so far, was seen on March 8 at $127.98 per barrel. Oil soared past $100 per barrel for the first time in years back in February as Russian forces escalated a conflict with Ukraine.
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