Oil prices stabilised on Thursday after a drop in U.S. fuel inventories provided some support, following four consecutive days of decline driven by investor concerns over global demand. By 1330 GMT, Brent crude had risen by 29 cents, reaching $76.34 per barrel, while U.S. West Texas Intermediate (WTI) saw a gain of 43 cents, bringing it to $72.36 per barrel.
George Khoury, head of education and research at CFI Financial Group, noted that although crude prices have steadied, they continue to face pressure from broader economic concerns, particularly fears of a slowdown in China’s economy. These concerns were amplified on Wednesday when revised U.S. jobs data added to worries about crude demand, particularly in light of last week’s weak economic indicators from China. Given that the U.S. is the largest oil consumer globally and China the biggest importer, these developments have significant implications for the oil market. Ashley Kelty, an analyst at Panmure Liberum, pointed out that the potential weakness in the U.S. economy, combined with China’s underwhelming recovery, suggests that oil demand growth may fall short of expectations.
Despite these concerns, a U.S. government report revealed a larger-than-expected drawdown in crude, gasoline, and distillate inventories for the week ending 16 August, providing a cushion to the market and limiting further losses. Investors are now speculating that the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, may reconsider their plan to gradually ease output cuts in October. OPEC+ has indicated that they could pause or reverse the planned output increases if necessary. Analysts at ING suggested that the current downward pressure on prices makes it increasingly likely that OPEC+ will need to abandon their plans to boost supply in October to avoid further price declines.
Adding to the mix of supply-side factors, concerns over the Israel-Gaza conflict have somewhat eased, as diplomatic efforts, although not yet resulting in a truce, continue.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
