Oil Prices Hold Steady Despite Weak Global Demand and Middle East Tensions
In the bustling city of London, the pulse of the oil market remained steady on Friday, with prices holding their ground amidst a tumultuous backdrop. Despite fears of supply disruption in the Middle East, signs of weak growth in global fuel demand cast a shadow over the market’s optimism.
Brent crude futures saw a modest uptick of 18 cents, reaching $79.70 a barrel by 12:40 p.m. Saudi time. Meanwhile, US West Texas Intermediate crude futures climbed 16 cents to $76.47, showing resilience in the face of uncertainty.
The past four weeks have not been kind to both benchmarks, with losses exceeding 7% in the longest streak of weekly declines this year. The looming threat of economic stagnation in major economies poses a formidable challenge to oil demand, overshadowing the escalating tensions in the Middle East.
Panmure Liberum analyst Ashley Kelty voiced concerns, stating, “Weak economic growth in major economies could stifle oil demand despite increased tensions in the Middle East that could impact supplies.”
Recent economic data from China, the world’s top oil importer, coupled with a survey highlighting weaker manufacturing activity across Asia, Europe, and the United States, paint a grim picture of a sluggish global economic recovery that could dampen oil consumption.
The dwindling manufacturing activity in China further compounded worries, as June data revealed lower imports and refinery activity compared to the previous year. Asia’s crude oil imports in July hit a two-year low, reflecting weakened demand in key markets like China and India, as reported by LSEG Oil Research.
In a bid to address the challenging market conditions, an OPEC+ meeting on Thursday decided to maintain the group’s oil output policy unchanged. This includes a plan to gradually unwind production cuts starting from October, a move aimed at balancing supply and demand dynamics.
Vandana Hari, founder of analysis provider Vanda Insights, remarked, “Crude futures were marginally higher early Friday … as demand concerns continued to tip the balance against supply worries stoked by a surge in Mideast geopolitical tensions.”
As oil investors keep a watchful eye on the market, developments in the Middle East add another layer of complexity. The recent killings of senior leaders of Iran-aligned militant groups Hamas and Hezbollah have reignited fears of all-out war in the region, raising concerns about potential disruptions to oil supplies.
Hezbollah, Lebanon’s Iran-backed group, declared that its conflict with Israel had entered a new phase following the death of its top military commander in an Israeli strike. The heightened tensions in the region serve as a reminder of the fragile balance that the oil market must navigate amidst geopolitical uncertainties.