Oil Prices Under Pressure As Economic Concerns Mount

Oil prices fell in Asian trading early on Thursday, losing ground for a fourth consecutive day, as market participants are concerned about the pace of China’s economic growth while keeping an eye on the Jackson Hole Fed meeting starting today, which could shed more light on whether interest rates would remain higher for longer.

In early Asian trading on Thursday, both benchmarks were down by around 0.3% as the market ignored a large US crude draw reported on Wednesday and remained focused on the underwhelming Chinese economic recovery. Traders will also watch closely the Fed meeting in Jackson Hole, Wyoming, the annual two-day event which could offer clues on whether the US central bank would continue with interest rate hikes and whether it still believes the US economy could pull off a soft landing after all the rate hikes.

WTI Crude, the US benchmark, slipped this week to a one-month low and traded at around US$78.60 a barrel in early Asian trading on Thursday. The international benchmark, Brent Crude, had slipped below US$83 per barrel and traded at around US$82.90 after hitting a four-month high of over US$87 a barrel in early August.

“The absence of any price-supportive factors left growing economic worries over China and expectations over the Federal Reserve sticking to its monetary policy tightening in the US weighing on sentiment in the broader financial markets as well as crude,” Vanda Insights said in a daily commentary on early Asian trading on Thursday.

The market has also taken notice of reports that the Biden Administration is drafting a proposal to ease some of the sanctions on Venezuela and allow more customers to import Venezuelan crude. Persistent concerns about the economy and the risk of higher supply from Iran and Venezuela – exempted from the OPEC+ cuts – outweighed the large crude draw of 6.1 million barrels for the week to August 18.