- OPEC output has increased significantly since the pandemic.
- China’s manufacturing activity contracted in August due to new COVID-19 restrictions.
- US crude stocks declined in the past week, showing increased demand in the US.
Early Asian trading on Thursday saw a decline in crude oil (CL) futures prices, driven by rising supply and concerns that the global economy will stall more due to additional measures to stifle COVID-19 in China.
After worries about a lack of supply surfaced in the months following Russia’s invasion of Ukraine and as OPEC attempted to boost production, recent market instability ensued.
However, output has increased to its most significant level since the early stages of the coronavirus pandemic in both OPEC and the United States. According to a Reuters survey, OPEC’s production reached 29.6 million barrels per day (bpd) in the most recent month, while US production increased to 11.82 million bpd in June. Since April 2020, both have been at their highest points.
The worst heat wave in decades, new COVID infections, and a troubled real estate sector all contributed to China’s manufacturing activity continuing its downward trend in August, raising concerns about the economy’s ability to maintain momentum.
The Caixin PMI has gone below the 50 mark. This move is a confirmation of a contraction in factory activity in August.
According to the White House, the US Biden administration’s proposed price restriction on Russian oil will be a topic of discussion when the Group of Seven club’s finance ministers meet on Friday.
The most recent week saw a decline in crude stocks, a minor increase in distillate inventories, and a pickup in demand, according to data released by the US Energy Information Administration on Wednesday.
Concerns over demand caused a decline in oil prices, but slight improvements in US demand estimates eased some of those worries.
In the week ending on August 26, crude inventories decreased by 3.3 million barrels, down to 418.3 million barrels. This decrease was more significant than the 1.5 million barrel drop projected by analysts in a Reuters poll.
The US gasoline product supplied increased last week, but it decreased 6.4% over the past four weeks compared to the same period last year. The total product supplied was 20.1 million bpd, a decrease of 6.4% from the previous year. This shows an uptick in demand and supports higher oil prices.