This week, crude oil prices started trading lower after last week’s positive outlook on demand took a hit following a decline in U.S. consumer sentiment. The University of Michigan’s consumer sentiment index dropped from 69.1 in May to 65.6 in June due to concerns about inflation and income, according to Reuters. As a result, Brent crude slipped towards $82 per barrel and West Texas Intermediate approached $78 per barrel in Asian trade.
The previous week had seen a strong rally in oil prices fueled by optimistic forecasts from OPEC+ and the IEA for robust demand in 2024. However, there is skepticism about OPEC’s forecasts due to its vested interest in crude oil, said IG analyst Tony Sycamore to Reuters.
OPEC’s monthly oil market report maintained its demand growth forecast for the year at over 2 million bpd, while the IEA’s report had significantly different projections for both demand and supply. The IEA predicted an oversupply of 8 million bpd in spare production capacity by 2030, which drew criticism from OPEC, calling it “dangerous” and warning of potential market volatility.
Despite last week’s significant gains, oil prices were still holding steady, although Bloomberg noted that this could change pending the latest data from China. The data included retail sales, which showed improvement in May, and industrial output, which fell short of expectations.
China’s retail sales grew by 3.7% last month, up from 2.3% in April, marking the fastest growth since February according to Reuters. Industrial output also rose by 5.6% last month, but this was below the expected 6% growth, influencing traders’ decisions in the oil market.