Winds of global demand concerns are blowing through oil markets

Fears of weak global demand hit prices Crude oil Which recorded its lowest levels in about seven months, suffering its fourth weekly loss in a row.

Oil analysts told “Independent Arabia” that Oil markets There are negative expectations regarding expected demand in the coming period due to economic slowdown in Asia, Europe and America.

Disappointing economic data from China, the world’s second-largest fuel consumer, as well as signs that showed weak manufacturing activity in Asia, Europe and the United States, increased the risk of an economic recovery of the world, which would put a burden on oil consumption in most parts of the world.

In addition, the impact of demand concerns in China, the world’s largest oil importer, and the United States, the largest consumer of this commodity, overshadowed supply concerns that had been fueled with increasing geopolitical tensions in the Middle East.

As oil investors closely monitor geopolitical tensions in the Middle East, the killing of senior leaders of armed groups linked to Iran, Hamas and Hezbollah, has raised fears that the region could be the the brink of war outside, threatening to disrupt the world. supplies.

Weak future demand

For his part, the Head of the Corum Center for Strategic Studies in London, Tariq Al-Rifai, said that the decline in oil prices in the past week was due to economic performance in the United States and Europe , which was lower than expected, which indicates weak demand for oil in the future. Al-Rifai said that expectations for an interest rate cut are higher than expected next September by 75 or 50 points, compared to 25 points in previous expectations, and this acceleration in reducing interest is will have a negative impact on the financial markets, and this will be proof that the Federal Reserve believes that the US economy is slowing down rapidly, and this will affect the demand for oil.

Regular prices

Oil analyst Khaled Boodai said oil prices were holding steady and did not see a sharp decline as the price of “Brent“The level of $80 per barrel is still close, and other crude oil is close to this price. Boodai said that it is a limited decline that has occurred and is part of a natural price change, and that there are no reasons or factors there that follows sharply. decline in oil prices, because there is no economic crisis in the world at the moment, and it is natural If the economies of the world go through periods of recession or increase in economic activity, this is part of the natural economic cycles. The current tensions in the Middle East have affected crude flows to a limited extent, as some oil tankers have been targeted near the Red Sea, and these targeted vessels are not danger.” shipments, so the impact of this target on crude prices remains limited. “

US interest rate cut delayed

Abdul Mohsen Al-Osaimi, CEO of the financial advisory firm “ewaveapp”, said that the decline in oil comes as a result of growing expectations that the Federal Reserve will not come to soft ground as a result of the delay to reduce interest rates, especially when there were strong signs of weakness in the labor market in the United States, and clear signs of the weakness of the American sector services and manufacturing, which was the main reason for the recession in prices during trading last July and the beginning of this August.

Al-Osaimi pointed out that weak manufacturing activity in Asia, Europe and the United States affected oil prices, as China has not yet succeeded in returning to previous levels of growth, thus speaking of hopes for return the largest import of crude. world oil production was one of the factors that supported the increase in the first half of this year over $90 per barrel. He pointed out that with China’s failure to meet these standards and the increase in stakes on former US President Donald Trump’s return to the White House, the issue points to the possibility of a renewed trade war. between Washington and Beijing again.

A strong signal

Al-Osaimi pointed out that the recent decline in the reading of the manufacturing sector in the United States is a strong indicator of entering a market recession again, especially since there is a link between energy prices and the cycle business. He pointed out that in the case of a recovery, which is expected to continue, oil prices are rising, while in contrast, in the case of a recession, which is expected to continue, crude and energy prices in the generally declining strongly. He said that an increase in geopolitical tensions in the Middle East usually has a positive effect on oil prices, if these tensions were unexpected or if specialists did not adjust to them and they were to enter their calculations already, explaining that the current situation is similar to what it is. took place at the beginning of the geopolitical recession between Europe and Russia in 2022.

Al-Osaimi pointed out that the oil markets have now adapted to the current situation in the Middle East, so the intensity of the events has not increased to a level that interferes with energy production or lines distribution, so they will have no foundation. impact on the movement of world oil markets.

price reduction

Oil prices fell last Friday and closed at their lowest levels since January last year, after data showed that job growth in the United States slowed more than expected last month, a as well as Chinese economic data that weighed on prices.

Brent crude futures fell $2.71, or 3.41 percent, to $76.81 a barrel when they settled, while recording a weekly decline of 4.3 percent, marking a fourth weekly loss in streak, the longest weekly decline since last December. While US West Texas Intermediate crude futures fell $2.79, or 3.66 percent, to $73.52, registering a weekly loss of 4.7 percent. Job growth in the United States weakened more than expected last July, and the unemployment rate rose to 4.3 percent, indicating a recession in the economy.

Economic data from China, the largest oil importer, and a survey of manufacturing activity last month showed weak manufacturing activity in the United States, Europe and Asia, raising the risk of a weak economic recovery in the -a world that affects oil consumption. The decline in manufacturing activity in China contributed to the decline in prices, as it raised concerns about demand growth after data last June showed a drop in imports and refinery activity compared to the a year before.

A decline in Asia’s crude oil imports

Data from the Oil Research Department of the London Stock Exchange showed that Asian crude oil imports fell last July to their lowest level in two years due to weak demand in China and India. In terms of supply, the OPEC+ alliance is still on track to boost production starting in the next quarter, a plan that the alliance reaffirmed at the meeting to monitor production levels last Thursday, because he kept the policy regarding oil production unchanged, including the federation’s intention to decrease Gradually, part of the production cut will start next October. However, officials insisted that supply increases could be temporarily halted or reversed as needed.