Oil prices surged earlier this week due to fears of escalating conflict in the Middle East. However, both Brent crude and West Texas Intermediate (WTI) are poised to record their fourth consecutive weekly loss. This decline is driven by mounting concerns over global demand, overshadowing the impact of the geopolitical risk.
Despite a brief uptick, oil prices overall are lower compared to last week. A recent Reuters survey highlights a global slowdown in manufacturing and a continued drop in road traffic in China. July’s Purchasing Managers’ Index (PMI) data indicates reduced activity in Asia, Europe, and the United States. In the U.S., the PMI fell sharply to 46.8, its lowest in eight months, due to decreased new orders.
The eurozone also reported weak performance, with the PMI holding steady at 45.8 in July. This persistent low figure suggests reduced energy consumption and, consequently, lower oil demand.
China, despite showing some improvement in manufacturing, reported a PMI below 50 for July, signaling contraction. As the world’s largest oil importer, any slowdown in China directly influences oil prices.
On the positive side, the Energy Information Administration (EIA) reported stronger-than-expected domestic oil demand for May. While this news is unlikely to impact prices immediately, it could lead to expectations of higher oil demand growth for the remainder of the year.
Some traders remain optimistic, betting that Brent crude might surpass $100 per barrel. Bloomberg noted that 300,000 crude oil call options were traded on Wednesday alone, marking the highest single-day volume since April.
Nevertheless, concerns about demand continue to dominate. Brent crude lost most of its early gains, trading just above $80 per barrel earlier today.