Crude oil prices extended a losing streak into its fifth day earlier today as expectations of weak demand weighed on benchmarks.
Brent crude slipped below $76 per barrel and West Texas Intermediate was below $72 earlier in the day, despite the EIA’s Wednesday report that saw inventory draws across the crude and fuel board.
There was also another reason for the price decline and it was the apparent belief among oil traders that OPEC will begin to roll back some of its production cuts—despite falling prices. OPEC has said quite clearly it would only roll back production cuts if prices are right.
“The downward pressure on prices makes it increasingly likely that OPEC+ will have to scrap their plans for gradually increasing supply from October. Failing to do so, will likely put further pressure on prices,” ING analysts said in a note.
“Weak global demand and the potential threat on OPEC+ rolling back on their production cuts are weighing on oil,” Phillip Nova analyst Priyanka Sachdeva told Reuters.
In a report earlier today, Bloomberg noted that the oil selloff triggered by the latest bout of oil demand fears was exacerbated by automated trading that follows technical trends to make trading decisions.
It also quoted Citi analysts as sounding a modest bullish note, as they said that “the possibility of weather-related disruptions throughout hurricane season, as well as geopolitical risks across North Africa and the Middle East, could pose a buying opportunity around $75 a barrel for a bounce back to $80s.”
The demand concern continue to focus exclusively on China where various economic indicators as well as oil import and fuel export data have suggested a slowdown in demand growth for the world’s most traded commodity.
On the other hand, the geopolitical premium to prices also remains in place to counter demand pessimism, as the chances of an actual ceasefire between Israel and Hamas remain remote.
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By Irina Slav for Oilprice.com
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