Oil under pressure with volatility ahead
Oil markets could remain under pressure as uncertainty prevails among traders regarding demand and supply levels. Prices reacted to the concerns around supply levels while Iraqi output remains stagnant and Russia presses on with production cuts.
Globally, prices have been declining for the last couple of days and approached levels not seen since before OPEC+ announced a cut in production. While the move has supported prices initially and created a large jump in prices, it wasn’t able to sustain them during the last couple of days as concerns around the US economy remained.
US recession fears and concerns around the monetary policy direction could continue to fuel volatility and uncertainty. As a result, traders could remain cautious in the face of the conflicting trends in the US and China as well as any potential new intervention from OPEC.
Crude prices could continue to see strong volatility during the few days leading to the Federal Reserve’s meeting next week with some important data releases expected along the way. US GDP figures could have a strong impact on prices in particular in case of a large surprise. Economic activity is expected to continue slowing down as prior interest rate hikes effects become more visible, affecting demand for oil in the process.
Over the short term, the week-long holiday in China that will start in a few days could give some hints on the health of the Chinese economy and purchasing power. The expected demand for travel during the holiday could serve as an indicator of jet fuel demand and could help drive oil demand expectations higher.
