Crude oil futures saw a second consecutive weekly decline, driven by a global cyber incident that heightened risk aversion and strengthened the dollar.
Chinese Demand and Market Dynamics
Ongoing concerns about Chinese demand have been a major factor influencing market sentiment, with recent data indicating a softer demand outlook. However, expectations of a tight market throughout Q3 have provided a floor for prices, according to analysts.
Supply and Demand Balance
The crude oil market is currently tight, characterized by diminishing inventories, strong backwardation, and robust physical differentials. While Morgan Stanley forecasts Brent prices to remain in the mid-$80s per barrel in Q3 and Q4, they predict a decline to the mid-$70s in 2025 as supply surpasses demand.
Price Movements
Front-month Nymex crude for August and September Brent both experienced significant declines on Friday and for the week, reflecting the overall volatility in the market.
Political Considerations
Traders are also monitoring political developments, particularly with regards to the upcoming election. Analysts have noted that the impact of a potential Trump presidency on oil prices remains uncertain, with differing opinions on how his policies might shape the market.
Industry Response and Potential Regulations
While Trump has advocated for increased drilling activities, industry experts suggest that many oil executives are cautious about significantly ramping up production. Additionally, the potential for regulatory changes, such as incentives for electric vehicles and revised fuel economy standards, could impact future demand for oil.
Market Performance
The energy sector, represented by the Energy Select Sector SPDR Fund ETF, emerged as the top performer for the week, indicating growing investor interest in the industry.
Top Gainers and Decliners
Among the top gainers and decliners in the energy and natural resources sector, notable fluctuations in stock prices have been observed over the past five days, reflecting the volatility within the industry.
Source: Barchart.com
