The price of Brent crude oil tested $68.51 during the week ending Sept.13, the lowest level in nearly 3 years, due to data indicating sluggish economic activity in the US and China, along with weak oil demand.
Brent crude oil closed at $69.52 on Tuesday, marking a decline of over 3% driven by weak economic data from China, the world’s largest oil importer, and the US, the largest oil consumer, which heightened risk perceptions in the oil market.
The US Institute of Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) rose to 47.2 in August but remained below market expectations. S&P Global’s manufacturing PMI came in at 47.9 in the same period, slightly below estimates.
Meanwhile, the foreign trade surplus in China in August was above expectations at $91 billion, exports exceeded the forecasts with an increase of 8.7%. Imports, on the other hand, fell short of expectations, rising 0.5%.
Analysts reported that lower-than-expected import data in China, the most important importer and exporter of the region, increased economic recession concerns in the country.
Brent crude oil, which recently fell below $70 per barrel for the first time since December 2021, has remained below $75 for the past two weeks, despite showing signs of a recovery. On Friday, the international benchmark Brent crude decreased by 0.15%, settling at $71.71 per barrel, down from the previous session’s closing price of $71.82.
Experts predicted at the end of August that prices would stay below $80 for a while given the decline in demand signaled by weak macroeconomic data in global markets and ongoing efforts to achieve a ceasefire in the Middle East.
– OPEC group is limited in its ability to counter sharp declines in oil prices
The fact that prices fell below $70, albeit for a short time, indicates that there would be an oversupply in the last quarter of 2024 and the first half of 2025, Gaurav Sharma, an independent London-based oil market analyst, told Anadolu.
Sharma stated that the price decrease was attributed to the high oil supply in the market and declining global demand, particularly in China, the world’s leading oil importer.
“Things will likely get worse before they get better. There is very little OPEC can do if non-OPEC supply remains strong as it currently is.,” Sharma said.
– US and China play a leading role in price decline
According to Osama Rizvi, an energy and economy analyst at the US-based market intelligence company Primary Vision, the recent decline in oil prices was significantly influenced by data indicating that the US economy is not performing well.
Rizvi pointed out that the situation became serious after the US economy added 142,000 jobs in August, less than market estimates, according to figures released Sept.6 by the Labor Department.
‘ Furthermore the manufacturing sector in the US has been in constant contraction for the past 7 months. Chinese oil demand has also slowed with the country registering the first annual decline in oil imports since 2000,” Rizvi said.
For this reason, Rizvi said that the OPEC+ group decided to postpone the production increase, which was planned to start in October after the decline in prices.
‘If non-OPEC production continues to grow and oil demand does not stabilize we might see another redux of “oil price war” like we did back in 2014,” he concluded.
