Impact of Decreasing US Stockpiles and Slowing Demand in China on Oil Prices
Oil prices remained stable on Wednesday, with the global benchmark Brent holding near a one-month low reached in the previous session. This comes as signs of weakening demand growth in China collide with the prospect of decreasing oil stockpiles in the US, according to Reuters.
Futures on Brent crude oil fell by 4 cents to $83.69, as concerns about slowing demand in China offset the potential impact of decreasing US stockpiles.
Oil Prices Drop as Demand Concerns Persist
Future prices for American crude oil, West Texas Intermediate (WTI), also fell by 4 cents to $80.72 per barrel.
Both Benchmarks Report Decline
Both benchmarks reported a decline over the past three sessions, with Brent futures trading at $83.30 per barrel on Tuesday, the lowest level since June 17.
Market Sentiments Weighed Down by Chinese Demand Concerns
Although concerns about demand in China continue to weigh on investor sentiments, the reduction in US inventories is a limiting factor for the decline in prices, said Priyanka Sachdeva, a senior market analyst at a brokerage in Singapore.
Phillip Nova Company
The stable retail trade data in the US indicates that the economy is still strong despite higher borrowing costs. This offsets concerns about a slowdown in the American economy, as well as those about reduced demand for “black gold,” she adds.
Chinese Economy Growth
According to official data from the beginning of the week, the economy of the Celestial Empire, which is the largest importer of oil in the world, grew by 4.7% in the second quarter. This is the slowest growth since the first quarter of 2023.
The stronger US dollar
The Impact of the Dollar Index on Oil Prices
According to ANZ Bank analyst Daniel Haines, the prices of oil are also affected by the dollar index. The dollar index measures the strength of the US dollar against a basket of competitive currencies, and on Wednesday it increased slightly, making oil more expensive for investors holding other currencies.
The Situation in the USA
The United States, being the largest producer and consumer of oil in the world, saw a decrease of 4.4 million barrels in crude oil reserves during the week ending on July 12, as reported by market sources.
Analysis of Crude Oil Reserves
Analysts surveyed by Reuters expected crude oil reserves to decrease by 33,000 barrels. The U.S. Energy Information Administration will release their official report on reserves later today.
Support for Oil Prices
In support of oil prices, retail sales in the U.S. remained stable in June, as the decline in car sales was offset by strong growth in other markets. This display of consumer resilience has strengthened the prospects for economic growth.
Geopolitical Risks Impacting Oil Prices
Analysts at Growmark Energy believe that the increasing geopolitical risks are contributing to the stabilization of oil prices in the coming months.
Oil Tanker Attacked in Red Sea
An oil tanker flying the flag of Liberia is assessing damages and investigating a potential oil spill after being attacked by Houthi rebels in the Red Sea, as reported by the Joint Maritime Information Center for the Red Sea and the Gulf of Aden (JMIC) on Tuesday.
*All information is current as of 9:00 AM Bulgarian time.
