(WO) — At the Asia Pacific Petroleum Conference (APPEC) in Singapore this week, traders were generally bearish, with many predicting oil prices could drop to $60 per barrel, despite Brent crude falling below $70, according to Rystad Energy.
This pessimism contrasts with supply and demand fundamentals that suggest inventory draws in the latter half of the year, which would normally support higher prices.
Recent developments include Brent crude oil futures falling below $70 per barrel on Tuesday. This drop occurred despite a tropical storm in the Gulf of Mexico that threatens to shut down nearly half of the region’s production. The market’s response was also influenced by disappointing U.S. labor market data and weak economic indicators from Europe. Additionally, ongoing concerns about soft Chinese consumption further weighed on prices.
OPEC+ attempted to buoy the market by delaying a planned production increase of 180,000 barrels per day until December. However, this was not sufficient to sustain higher prices. OPEC+ crude oil production fell by 373,000 barrels per day in August to just under 40.68 million barrels per day—the lowest since July 2021—primarily due to a significant drop in Libyan output.
The future production outlook remains uncertain, dependent on geopolitical developments in Libya, Iraq, and Kazakhstan, as well as broader global conditions. Economic indicators from China show a decline in property investment, retail sales, and manufacturing activity, though export growth remains a bright spot.
Refinery margins have improved due to lower crude prices, leading to increased runs, especially among independent refineries. However, weakening road fuel demand and anticipated export quota cuts have led to a reduction in refinery runs forecasts for the coming months.
In China, while aviation activity remains strong, road transport—a major component of oil demand—has slowed significantly. The transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) continues to impact oil demand. Despite a slight slowdown in global EV sales, China remains a leader in this market, with a 50% EV market share achieved for the first time.
Attention now shifts to upcoming economic data releases, including the Consumer Price Index (CPI) on September 11 and other key indicators. The Federal Open Market Committee (FOMC) meeting on September 17-18 is expected to influence market sentiment, with a potential rate cut affecting oil prices and the U.S. dollar.
China’s unemployment report for August is due on September 13, with expectations of a rise in the jobless rate. Market sentiment remains bearish, reflected in traders’ concerns at APPEC. Despite this, OPEC+ has the potential to influence market dynamics with stronger signals on production cuts. Positive news from China and the US could shift sentiment before supply and demand fundamentals take full effect on oil prices.
