The Heritage Foundation Talks Oil Prices

In an exclusive interview held late Friday, The Heritage Foundation’s Diana Furchtgott-Roth highlighted to Rigzone that “oil prices are set by expectations of future supply and future demand”, adding that “expectations of supply are up” and “expectations of global demand are down”.

“Oil inventories in the United States are rising,” Furchtgott-Roth - Director, Center for Energy, Climate, and Environment, and The Herbert and Joyce Morgan Fellow in Energy and Environmental Policy, at the Heritage Foundation – told Rigzone.

“Inventories beat expectations of a decline of 2.2 million barrels and rose 1.4 million barrels. Plus, expectations of a war in the Middle East, which would have disrupted oil production and distribution, are diminishing,” Furchtgott-Roth added.

“Europe is slowing as it invests in green energy and deindustrializes. China’s National Bureau of Statistics showed the increase in fixed-asset investment slowing and real estate investment actually declining,” the Heritage Foundation representative continued.

“The property market is China’s Achilles heel and it’s doing worse than expected - leading to a slower Chinese economy,” Furchtgott-Roth went on to state.

In another exclusive interview held late Friday, Carole Nakhle, the CEO of consultancy Crystol Energy, told Rigzone that the oil market was still looking for direction given the mixed economic data and mixed geopolitical developments in recent weeks.

“That said, the prices we are seeing do not convey a tight market which many expected at this time of the year,” Nakhle said in the Friday interview.

“Such prices are telling us that demand is not growing as fast as expected while supply growth remains robust outside OPEC+,” Nakhle added.

In a market analysis sent to Rigzone today, Mazen Salhab, MENA Chief Market Strategist at BDSwiss, said “crude oil prices have lost some ground due to concerns about demand from China and mixed economic indicators from the United States”.

“Latest reports from China have highlighted a slowdown in key sectors, including industrial production, contributing to a more cautious outlook for the oil market,” Salhab warned in the analysis.

“Continuing geopolitical uncertainty and risks of a flare-up could continue to drive volatility,” the strategist added.

In a separate market analysis sent to Rigzone earlier today, Antonio Ernesto Di Giacomo, a Senior Market Analyst at XS.com, stated that, on August 18, “the Asian oil market experienced a significant decline, with Brent crude trading at $79.55 per barrel and West Texas Intermediate at $76.52 per barrel, down nearly two percent from the previous week”.

“This price drop reflects growing concerns about a potential decrease in demand from China, the world’s largest oil importer,” Di Giacomo added in the analysis.

“The market situation is further impacted by negotiations in the Middle East over a possible ceasefire, which could reduce supply risks and ease pressure on crude oil prices,” Di Giacomo continued.

In this analysis, the XS.com analyst noted that China is showing worrying signs of economic slowdown.

“In July, several indicators pointed to a cooling of the Chinese economy, including a decline in housing prices and a rise in unemployment rates,” he said.

“These developments have triggered a massive sell-off in oil markets, as investors fear a slowdown in China could lead to lower crude demand in the coming months,” he added.

“Additionally, the end of the peak driving season in the United States has added pressure to an already strained market, contributing to the price decline,” he continued.

Di Giacomo stated in the analysis that, despite concerns about demand in China, geopolitical tensions in the Middle East remain a crucial factor supporting the market.

“The conflict in Gaza and ongoing tensions between Russia and Ukraine have kept markets on edge, as any escalation could affect the global oil supply,” he added.

“However, recent peace negotiations in Gaza, led by the United States, Qatar, and Egypt, though without major breakthroughs, have raised expectations of a potential easing of tensions, which could relieve pressure on crude prices,” he went on to state.

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