Crude Oil Price Falls in H2 August 2023, But Outlook Seems Bullish Amidst Production Cuts

Despite the voluntary cuts from OPEC+ countries, including Saudi Arabia, Russia, and Iran, Crude Oil prices plunged during the H2 of August 2023 amid the weak Chinese economy. However, the overall Crude oil prices witnessed a volatile week as the price declined initially and recovered in the latter- half.

Surprisingly, after weeks of surging since July, Crude Oil prices fell early during the fourth week of August due to the strengthened dollar and concerns about China's weak economic recovery. Brent Crude Oil prices fell by -2.6% to settle within 84.04 USD a barrel, while US West Texas Intermediate Crude Oil declined by -3.4% to settle at 80.12 USD a barrel during this timeframe. The stronger dollar made oil more expensive for buyers using other currencies. Therefore, traders' pessimistic approach to acquiring the oil supported the bearish trend. Meanwhile, the concerns about China's economy led to expectations of lower oil demand. Despite the economic headwinds, as the data showed signs of weakness from Japan, the eurozone, and Britain, the tanker market has benefited from the fact that Europe is now one importer of crude oil via maritime transport. This might bring prosperity for Crude Oil trade in the European market despite the risks of economic recession.

On the other hand, Crude Oil prices fell early this week but later recovered after data showed a decline in gasoil stocks in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub. The decline in gasoil stocks was seen as a sign of rising demand, which could support oil prices. Likewise, the decline in China's Crude Oil inventories is indicating a positive sign to boost the oil market. As per the US Energy Information Administration, the US Crude Oil inventories declined by nearly 6 million barrels, along with gasoline stocks, due to strong exports. The prices rose slightly as Tropical Storm Harold moved over Southern Texas and raised concerns about possible supply disruptions. However, prices were recovered as no major disruptions to oil production were reported during the given period. Recent reports show China is trying to cut its key rates to boost the economy. Unfortunately, the substantial cut is not ample enough to support growth.

As per ChemAnalyst, the Crude Oil market remained volatile this week in response to the above-mentioned factors. However, it is anticipated that a further rise in Crude Oil prices is estimated amid the supply cut from Saudi Arabia and Russia in the near term.