Oil Sinks Below $75 as Demand Concerns in US, China Offset Middle East Escalation
Oil prices had a volatile week, with September '24 WTI extending last week's losses to finish $3.64 lower at $73.52/Bbl. Demand concerns in China and the US overshadowed heightened geopolitical risks in the Middle East.
Prices found support on Wednesday after Iran ordered retaliation against Israel for conducting airstrikes in Iran and Lebanon, killing a Hamas leader. The conflict has escalated since last weekend following a Hezbollah attack on Israel, potentially jeopardizing the ongoing cease-fire talks.
Furthermore, futures also found support from increased expectations that US monetary policy easing will boost consumption, with Fed Chair Powell hinting that an interest rate cut could come as soon as September.
However, falling manufacturing activity in both China and the US weighed on prices, adding to concerns about demand growth after last month's data showed Chinese imports and refinery activity shrinking. US manufacturing activity shrank in July by the most in eight months, according to the Institute for Supply Management's manufacturing PMI. Additionally, prices lost further ground following Friday’s weak US payroll data.
Meanwhile, an OPEC+ meeting on Thursday left the group's production policy unchanged and is still on track to bring back production in 4Q 2024. AEGIS is neutral on balance 2024, expecting further out tenors to rise toward prompt prices. If price weakness continues due to ongoing demand concerns, the cartel reiterated it might delay or cancel the gradual withdrawal of voluntary cuts planned from October onwards to support prices and avoid an oversupply.