⭐️ Crude Oil Faces Pressure Amid Mixed Global Signals
The oil market experienced its third consecutive day of decline on Tuesday thus far, influenced by a combination of economic data and market dynamics.
1️⃣ Chinese Economic Slowdown:
- Q2 GDP rose 4.7%, below expectations and previous values
- June retail sales increased only 2.0% y/y, the slowest in 14 months
- June new home prices declined for the 13th consecutive month
2️⃣ U.S. Economic and Political Landscape:
- Federal Reserve Chairman refrained from mentioning specific timelines for interest rate cuts
- Improved prospects for Donald Trump's presidential bid weigh on oil prices due to expectations of pro-US drilling policies
- High interest rates expected to continue until Q4 2024
- June ISM index below 50; July Michigan Consumer Sentiment Index at 66, an 8-month low
3️⃣ OPEC+ and Global Supply Dynamics:
- OPEC+ plans to gradually phase out 2.2 million bpd voluntary cuts from October 2024 to September 2025
- OPEC June production at 33.9 million bpd, slightly above target
- Russian crude exports fell to a 5-month low
- Non-OPEC production at record highs
4️⃣ Demand Outlook:
- IEA projects global oil demand growth to slow to 970,000 bpd in 2024 and 980,000 bpd in 2025
- U.S. summer driving season provides some support
5️⃣ Market Indicators:
- U.S. crude inventories 4.4% below seasonal 5-year average
- Active U.S. oil rigs fell to a 2-1/2 year low of 478
- Speculative net long positions in NY crude futures increased 1.4% to 283,894 contracts as of July 9, a 3-month high
💡 Despite these mixed signals, oil prices are currently experiencing a weakening trend at high levels. While OPEC+ production cuts and the U.S. summer travel season provide some support, factors such as China's economic weakness, potential easing of OPEC+ cuts in Q4, and progress in Israel-Hamas ceasefire negotiations limit further upside potential.
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