FX.co ★ Oil extends declines on demand concerns

Concerns about the prospects for global economic growth, as well as recent statements by the United States administration about its intention to get OPEC+ to increase crude oil production, significantly affect the price of WTI oil. On Friday, it fell to the level of $68.38 per barrel. The administration of the US President urged the OPEC countries to discuss a complete refusal to reduce the production of oil. According to Joseph Biden, this will help reduce the cost of gasoline for end users. And this is not possible at high prices for raw materials.

After the U.S. Energy Information Administration (EIA) reported a drop in oil and gasoline inventories, oil prices tried to move higher. But the growth stopped rather quickly. However, the deterioration of the forecast of the International Energy Agency (IEA) about global demand for oil in 2021 significantly affects the mood of market participants. In its monthly report, the IEA has cut its 2021 oil demand growth forecast by 100,000 bpd. In addition, the agency has downgraded the estimate of demand for the next year by 200,000 bpd. OPEC ministers left their previous forecasts of global demand growth for this and next year unchanged, but raised expectations for non-cartel supply.

Thus, benchmark Brent crude futures fell to $ 70.64 per barrel. As a result of the trading session on Thursday, the price fell by 0.2% to $ 71.31 per barrel. The cost of WTI crude oil futures for September at the New York Mercantile Exchange was $ 68.95 per barrel. Previously, this price fell by 0.2% to $ 69.09 per barrel.

The active spread of new coronavirus variants contributed to the fact that Goldman Sachs analysts revised their forecasts for global oil demand in the next two months. Global demand is expected to decline from 98.4 million barrels per day to 97.8 million barrels per day in August and September. China's fight against the Covid pandemic poses a tangible threat to the energy market today. It is expected that due to new restrictions in the country, which is the largest consumer of oil, the demand for this raw material will noticeably decrease in the current quarter.

Taking into account the lower demand forecast from the IEA and expectations of growth in energy production outside the OPEC, WTI crude oil has every chance to continue to decline to $ 65 per barrel.