Oil prices experienced a marginal decline on Tuesday, awaiting clarity on whether Iraqi exports through the Ceyhan oil terminal would resume, a move that could alleviate the supply tightness caused by OPEC+ cuts. Concurrently, apprehensions over China’s faltering economy continued to cast a shadow over the demand outlook for oil.
Brent crude slipped by 11 cents to $84.35 per barrel as of 0651 GMT, while the U.S. West Texas Intermediate (WTI) October contract, which is more actively traded, decreased by 10 cents to reach $80.02 per barrel.
ANZ Bank analysts Brian Martin and Daniel Hynes observed that “Crude oil struggled to keep its head above water on signs of supply tightness easing,” underscoring the complex dynamics at play.
Hayan Abdel-Ghani, Iraq’s oil minister, visited Ankara to discuss multiple matters, including the potential resumption of oil exports through the Ceyhan terminal. This development could provide some relief to the supply pressures due to OPEC+ production cuts.
However, a subdued economic outlook in China, a major global oil consumer, continued to impact oil prices. China’s central bank’s moderate cut to its one-year lending rate disappointed the market, which had anticipated more aggressive stimulus measures amid an economic slowdown.
The Eurasia Group highlighted that “China’s economic weakness is weighing on oil prices and will create a ceiling for them this year, especially as Beijing appears committed to avoiding large-scale fiscal stimulus.”
J.P. Morgan analysts projected a deceleration in global demand growth for mobility fuels to 0.6 million barrels per day (bpd) year-on-year for the reference week ending August 12. Considering the broader picture, year-to-date growth in demand for mobility fuels stood at 1.6 million bpd, with China’s base effect removed from the equation.
Amid these factors, oil prices are also impacted by expectations of U.S. crude oil and gasoline inventories decreasing in the previous week, as indicated by a preliminary Reuters poll. Data from the American Petroleum Institute industry group is anticipated to be released on Tuesday, while the Energy Information Administration’s figures are due on Wednesday.
Additionally, market attention is directed towards preliminary U.S. August PMI data and the Federal Reserve’s annual economic symposium at Jackson Hole, both scheduled for later this week. Recent U.S. economic data has bolstered the view that the Federal Reserve could maintain higher interest rates for an extended period, potentially dampening demand prospects for oil and various consumer goods.