Oil prices have been on a four-day losing streak, but Brent oil is holding at a crucial support level following data showing declining US inventories. Ongoing uncertainty surrounding China continues to fuel demand concerns.
The American Petroleum Institute (API) reported a week-on-week decline in inventories, with crude oil stocks dropping by 3.9 million barrels, more than the anticipated 2.47 million barrels which was expected given the mid-summer period.
Oil bulls are also keeping an eye on wildfires in Canada, which threaten supply as some producers have already reduced production. Analysts note that a significant amount of supply is at risk, which could be a concern for market participants.
This outlook aligns with recent comments from OPEC+ members, who indicated that a change in output is unlikely in the near future. However, OPEC faces challenges from member states, as a July Reuters survey revealed that they have exceeded agreed targets for a second consecutive month.
In the medium term, an increase in oil prices is anticipated as the summer months in Europe and the US come to an end. A supply deficit is likely toward the end of Q3 and the beginning of Q4.
The Chinese Government and the Peoples Bank of China (PBoC) announced its first major monetary policy move since February. PBOC Governor Pan Gongsheng announced at the Lujiazui forum that the 7-day reverse repo rate will gradually become the main policy rate. This move is seen as a way to stimulate economic growth following disappointing data in China.
Looking ahead, US data dominates the back-end of the week with PMI, GDP, and PCE inflation releases. Geopolitics also remains a concern, and any developments in that area need to be monitored.
Technically, oil prices have been declining but encountered a significant support level. Immediate support is at 81.58, while resistance is around the 83.00 handle.
In conclusion, the current trends in oil prices are influenced by a variety of factors including US inventory data, geopolitical concerns, and Chinese economic stimulus. Investors should monitor these factors closely to make informed decisions about their investments in the oil market.