After falling close to 7% last week, crude oil prices rose 2% on Monday as traders mulled the supply outlook ahead of an OPEC+ meeting. Since August 29, both WTI and Brent have been trading below $100 on the back of recession fears and concerns over the impact of new Covid lockdowns in China.
In the last few months, falling crude prices have given some relief to the Indian economy. Low oil prices also pushed Indian equity markets higher in August, resulting in a 3.5 percent gain.
Oil prices have fallen in the past three consecutive months, after touching multi-year highs in March, on concerns that interest rate hikes and COVID-19 curbs in parts of China, the world's top crude importer, may slow global economic growth and cool oil demand. However, experts believe that prices may rise above $100 in hopes that OPEC+ will discuss output cuts at a meeting on Monday, despite supplies remaining tight.
According to a Bloomberg report, on August 22, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said "extreme" volatility and lack of liquidity mean the futures market is increasingly disconnected from the fundamentals of the market. He said prices were falling based on unsubstantiated information about demand destruction and confusion about the sanction. This volatility could force OPEC+ to tighten production when it meets in September to discuss output targets, he said.
But the oil demand from China is not signaling any kind of revival. Crude oil imports in July increased a mere 0.9% to 8.83 million b/d from the 47-month low in June amid destocking and a slow domestic recovery, S&P reported, quoting China's General Administration of Customs data.
In July, crude throughput at Chinese refineries slumped to the lowest level since the height of the pandemic in March 2020, amid unplanned facility outages and lower processing rates at independent refiners due to declining refining margins, according to Reuters report.
On the other hand, the Caixin China General Services PMI fell to a three-month low of 53.0 in August 2022 from 54.0 in July, due to the recent wave of COVID infections and energy shortages following the historic drought.
Meanwhile, experts believe that the outcome of Monday's meeting could be a wait-and-see approach as large uncertainties about the revival of Iran's nuclear deal are hanging over the market, apart from where the demand will go from here.
In mid-August, the EU said that it was studying Iran’s response to a "final" draft agreement on reviving the 2015 nuclear accord, and analysts said that a potential deal could unleash about 2.5 million BPD of Iranian crude on the global markets.
Before the U.S. resumed sanctions on Iran after former President Donald Trump left the deal in 2018, Iran was the third-largest producer in OPEC after Saudi Arabia and Iraq. In 2017, it was the fourth-largest oil producer in the world, after the U.S., Saudi Arabia, and Russia.
Elsewhere, TTF natural gas futures, the European benchmark jumped almost 30% to approach €280 per megawatt hour on Monday, after touching a three-week low of €203 on Friday, as Russia's Gazprom reversed its plan to resume flows through the Nord Stream pipeline and shut it indefinitely, citing maintenance requirements, Trading Economics report showed.
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