Oil prices fell marginally on Friday as investors weighed the OPEC producer group’s optimistic demand forecasts against mixed economic data from China.
Brent crude fell 15 cents at 0515 GMT to $86.25 a barrel, while West Texas Intermediate crude futures were down 13 cents at $82.69 a barrel.
Both indicators have been on a sustained rally since June, with West Texas Intermediate crude (WTI) trading at its highest level this year on Thursday and Brent hitting its best price since January.
It is possible to say that oil markets may have been overbought due to the rally seen for several weeks, but OPEC+ production cuts and improving demand outlooks remain bullish factors.
The Organization of the Petroleum Exporting Countries (OPEC) said on Thursday it expects world oil demand to increase by 2.25 million barrels per day in 2024, compared to a growth of 2.44 million barrels per day in 2023. Both forecasts were unchanged from last month.
Compared to China’s situation in 2023, it would not be wrong to expect solid economic growth to increase oil consumption, while improvements are expected to continue in 2024.
Market sentiment also rose on Thursday in the US on consumer prices data, fueling speculation that the Federal Reserve is nearing the end of its aggressive rate-raising cycle.
Meanwhile, China’s sluggish economic data and the slump in Wall Street are weighing on risk sentiment, and a stronger US dollar is weighing on commodity prices.
Customs data showed crude oil imports rose year-over-year, while overall China’s exports fell 14.5% from last year, and monthly crude oil imports fell from record levels in June to the lowest levels since January.
This week’s data also showed that China’s consumer prices are deflation, and factory door prices have extended their July fall, raising concerns about fuel demand in the world’s second-largest economy.
On the supply side, prices are bolstered by fears of supply from Saudi Arabia and Russia to extend production cuts and the potential for conflict between Russia and Ukraine to disrupt Russian oil shipments in the Black Sea region.
It is also said that crude oil markets will likely show a supply gap in the second half of this year, but this will be less than OPEC’s estimate of a deficit of around 2 million barrels.
While forecasts for the supply gap are lower, it is expected to be enough to push prices above US$90 per barrel by the second half of 2023.
