The International Energy Agency stated in a forecast that macroeconomic fundamentals of the world’s largest and second-largest economies— the US and China- are increasingly bullish to support oil prices, with oil demand leading to a fresh record this month.
Analysts said market fundamentals also prefer a sustained bull run for oil, especially with the Opec+ gearing up to put a massive shortage into the market in the second half.
However, on Friday, after ending the seven-week rally last week, the prices increased by about 1.0 percent on the signs of slowing US output.
Moreover, the IEA estimated that oil demand, which hit a record 103 million barrels per day in June, reached another peak in August. Besides, the output cuts from Saudi Arabia and Russia set the stage for a sharp decrease in inventories from the end of 2023, which according to the IEA, could push oil prices even higher. Besides, some analysts are not ruling out the prospects of prices hitting $100 per barrel in the second half.
Moreover, analysts at Kamco Invest said the recent support to prices came from record demand from Asian refiners for US crude deliveries amid obstacles that include high temperatures hindering pipeline deliveries to ports in the US Reports of continued buying of Saudi crude oil by China also supported prices.
Ole Hansen, head of Community Strategy at Saxo Bank, said last week that having a shortage of steam cost $87.50 last week, and a long overdue merger period may now emerge with the news from China hurting sentiment.
Market pundits argued that estimated high stock levels in China would allow its refiners to bring out crude from inventories and low purchases when oil prices rise, undermining the ongoing efforts of the Opec+ group and its leader Saudi Arabia to tighten the market and support costs.
Viktor Katona, an analyst at Kepler, said, ” China built up the stocks to run them down when it wanted to avoid the overheated market of July- August.”
Moreover, market experts said that after seven consecutive weeks of increase last week, oil prices dipped after China reported another batch of weak economic data. Besides, concerns about the credit markets and property in the world’s second-largest economy also weighed on market opinion. The worries about the Chinese economy are top of the bearish factors for oil, considering that China is predicted to account for more than 70 percent of this year’s global oil demand growth.
