Oil prices fell in Asian trading early on Thursday, losing ground for a fourth consecutive day, as market participants are concerned about the pace of China’s economic growth while keeping an eye on the Jackson Hole Fed meeting starting today, which could shed more light on whether interest rates would remain higher for longer.
In early Asian trading on Thursday, both benchmarks were down by around 0.3% as the market ignored a large U.S. crude draw reported on Wednesday and remained focused on the underwhelming Chinese economic recovery. Traders will also watch closely the Fed meeting in Jackson Hole, Wyoming, the annual two-day event which could offer clues on whether the U.S. central bank would continue with interest rate hikes and whether it still believes the U.S. economy could pull off a soft landing after all the rate hikes.
WTI Crude, the U.S. benchmark, slipped this week to a one-month low and traded at around $78.60 a barrel in early Asian trading on Thursday. The international benchmark, Brent Crude, had slipped below $83 per barrel and traded at around $82.90 after hitting a four-month high of over $87 a barrel in early August.
“The absence of any price-supportive factors left growing economic worries over China and expectations over the Federal Reserve sticking to its monetary policy tightening in the US weighing on sentiment in the broader financial markets as well as crude,” Vanda Insights said in a daily commentary on early Asian trading on Thursday.
The market has also taken notice of reports that the Biden Administration is drafting a proposal to ease some of the sanctions on Venezuela and allow more customers to import Venezuelan crude.
Persistent concerns about the economy and the risk of higher supply from Iran and Venezuela – exempted from the OPEC+ cuts – outweighed the large crude draw of 6.1 million barrels for the week to August 18.
By Tsvetana Paraskova for Oilprice.com
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But it is a waste of time since the global oil fundamentals are robust and the whole world knows that growth rates of the Chinese economy in the first half of 2023 have hit 6.3% exceeding projections by the World Bank and the IMF compared with 1.2% for the US and 0.8% for the EU. Moreover, China’s crude imports have been breaking records unforeseen before hitting 13 million barrels a day (mbd).
Any weaknesses in the market emanate from fears about the health of the US banking system and the potential of another interest hike by the US Federal Reserve Bank.
On the supply side the potential for both Iran and Venezuela to boost production significantly soon is very remote . Therefore it will hardly have any bearish impact on global oil supplies.
Oil prices are going to resume their surge once the global oil market has sifted through Western disinformation and consigned them to the waste bin.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
Long $BA Boeing strong buy