Thursday saw a decline in oil prices due to underwhelming economic data from major economies. This was compounded by investors anticipating a speech by U.S. Federal Reserve Chair Jerome Powell on Friday, seeking indications regarding potential changes in interest rates.
At 0619 GMT, Brent crude experienced a decrease of 19 cents, equivalent to a 0.2% decline, reaching $83.02 per barrel. In a parallel movement, U.S. West Texas Intermediate crude also saw a drop of 24 cents, indicating a 0.3% decrease, settling at $78.65 per barrel.
Analysts noted that a bleak outlook for global economies emerged on Wednesday from a multitude of purchasing managers' index (PMI) surveys related to manufacturing. This situation, driven by the surveys, has given rise to concerns about demand.
In August, Japan witnessed a consecutive third-month contraction in its factory activity, while the Eurozone observed a greater-than-anticipated decrease in business activity, with Germany being notably affected. The current quarter appeared to hold the possibility of an economic contraction for the UK, putting it at risk of entering a recession.
In August, business activity in the U.S. approached a point of stagnation, registering its slowest growth since February.
In the meantime, Federal Reserve officials and representatives from the European Central Bank, the Bank of England, and the Bank of Japan are converging in Jackson Hole. The discussions there might primarily revolve around the concept of maintaining elevated interest rates over an extended period, even in the face of a slight decline in inflationary pressures.
Sugandha Sachdeva, the Executive Director and Chief Strategist at Acme Investment Advisors, pointed out that the downward push on oil prices primarily stems from worries about a potential decline in demand coupled with an increase in oil supply. This situation is compounded by the discouraging Purchasing Managers' Index (PMI) readings.
In August, Japan experienced a third consecutive monthly contraction in its factory activity, while business activity across the Eurozone, especially in Germany, declined beyond anticipated levels. Additionally, there were indications that the UK's economy might contract in the present quarter, increasing the risk of entering a recession.
In August, business activity in the U.S. neared a state of stagnation, marking its slowest growth since February.
Meanwhile, officials from the Federal Reserve, along with policymakers from the European Central Bank, the Bank of England, and the Bank of Japan, are convening in Jackson Hole. There, discussions about the possibility of sustaining higher interest rates over an extended period might take precedence, even in light of a decrease in inflationary pressures.
Sugandha Sachdeva, the Executive Director and Chief Strategist at Acme Investment Advisors, indicated that the primary cause of the decline in oil prices is the mounting apprehension regarding a potential drop in demand, coupled with an increasing oil supply, compounded by the discouraging Purchasing Managers' Index (PMI) readings.
