Oil prices in Asian trade on Friday saw a decline for the second consecutive week, driven by persistent worries over demand despite a notable reduction in U.S. crude inventories and increasing expectations of an interest rate cut by the Federal Reserve in September.
As of early Friday, the U.S. benchmark WTI Crude dropped by 0.6% to approximately $82.30 per barrel, while Brent Crude, the global benchmark, fell by 0.56% to $84.63 per barrel. Both benchmarks were heading towards a weekly decrease of about 0.3%.
Earlier in the week, oil prices had briefly risen following a larger-than-anticipated drawdown in U.S. crude inventories reported by the Energy Information Administration (EIA) on Wednesday morning. The EIA’s weekly report revealed a decrease of 4.9 million barrels in commercial crude stocks for the week ending July 12.
However, the positive impact from the inventory draw was short-lived as concerns mounted over China’s economic slowdown and its implications for oil demand. The Chinese Communist Party’s Central Committee meeting, which concluded without addressing key economic concerns in a substantive manner, contributed to market uncertainty.
According to Shi He-ling, an associate professor of economics at Monash Business School, the meeting’s outcomes were perceived as lacking in concrete economic policy adjustments, characterized instead by vague and clichéd statements.
Market analysis by Vanda Insights underscored that attention swiftly returned to global oil demand, particularly in Asia, where signs of tepid growth persist despite sporadic inventory declines.
Supporting oil prices from falling further this week were statements from Federal Reserve Chair Jerome Powell, who expressed confidence in recent inflation data, suggesting progress in inflation control and potentially paving the way for a rate cut in September.
Additionally, ongoing wildfires in Canada, threatening oil sands production, provided further support to oil prices. Notably, MEG Energy’s precautionary evacuation of non-essential personnel from its Christina Lake Regional Project due to nearby wildfires highlighted the volatility facing oil production and supply.
In conclusion, while U.S. crude inventories showed a significant decline this week, broader concerns over global demand dynamics and economic uncertainties continue to exert downward pressure on oil prices, amidst a backdrop of cautious optimism regarding potential monetary policy interventions by the Federal Reserve.
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