Brent Crude oil futures (OIL) are approaching $81 per barrel, losing another 1.5% today. The reasons for this are mainly the higher probability of a successful ceasefire between Israel and Hamas (announced by Netanyahu today), and limited demand. Although we have seen an escalation between Israel and Yemen Houthi in recent days, but it has not brought a significant rebound in oil. Some risk factor is still the Chinese economy, whose expansion is disappointing expectations. Lower oil prices are also supporting stock market sentiment.
- Also, yesterday's PBoC rate cut became 'proof' to the market that the slowdown is also perceived by the country's management, which will try to stimulate demand.
- U.S. gasoline demand fell by an average of 615,000 barrels in the week ended July 12
- So far, demand for fuel is not very strong, although inventories in the US are relatively low; they have been falling for the past 3 weeks.
- In addition, Trump's potential election victory could lift oil production.
- According to Goldman Sachs, oil price quotes reflect virtually no geopolitical premium.
- Rystad Energy expects weakness in China's economy, the prospect of rate cuts in the U.S. and a decline in the risk of broader military conflict in the Middle East to put further pressure on oil
- However, year-round oil demand still appears robust; UBS forecasts estimate about 200,000 barrels of deficit/day this year
- TD Securities sees some upside potential; overall oil market positioning suggests still strong belief in possible price increases from current levels
- Some risk to oil supply is posed by fires in Alberta (Canada), where, according to Goldman, ca. 400,000 barrels of production/day.
