Oil Strategist Flags Weaker Global Fuel Demand

In a statement sent to Rigzone on Friday, Mazen Salhab, MENA Chief Market Strategist at BDSwiss, warned that “crude futures were volatile”, adding that they “could remain under pressure and could decline for the fourth consecutive week driven by weaker global fuel demand”.

“Disappointing economic data from China and reduced manufacturing activity across Asia, Europe, and the U.S. have offset the rising geopolitical tensions in the Middle East,” Salhab noted in the statement.

“The economic slowdown in the world’s largest oil importer, China, impacted negatively crude prices. Lower crude oil imports in China have further hurt demand prospects,” Salhab continued.

In the statement, Salhab highlighted that there was “stronger than expected U.S. domestic oil demand for May” but warned that “overall demand concerns overshadow these positive signs”.

Looking at supply in the statement, Salhab said “OPEC’s Joint Ministerial Monitoring Committee (JMMC) could maintain its current production policy”.

“However, the organization could postpone its plans for production hikes if necessary,” Salhab added.

“Lower oil prices could drive the organization toward some adjustments. Otherwise, higher supply could weigh on prices in the coming months,” Salhab continued.

In a separate statement sent to Rigzone on Thursday, Hani Abuagla, a Senior Market Analyst at XTB MENA, said, “geopolitical tensions in the Middle East usually have a limited temporal impact on the oil market”.

“Elevated levels generally last for about 20-30 days and the future of the raw material depends on the fundamental situation, which is currently quite mixed in the oil market,” Abuagla added.

In this statement, Abuagla noted that, “if OPEC+ continues to focus on increasing production and data from China do not show recovery, oil prices may permanently fall to around $70-80 per barrel”.

“However, in the coming weeks, we can expect increased volatility and prices to remain around $80 per barrel,” Abuagla predicted in the statement.

The Brent price closed at $79.52 per barrel and the WTI price closed at $76.31 per barrel on August 1. At the time of writing, the former is trading at $77.38 per barrel and the latter is trading at $74.00 per barrel.

To contact the author, email andreas.exarheas@rigzone.com