Analysts expect oil prices to drop significantly soon due to concerns about China’s demand.
Morgan Stanley and commodities traders at Trafigura have indicated that Brent crude, the global benchmark, will likely continue its decline following a nearly 10% decrease in value last week.
Although Brent crude has recovered today after hitting its lowest level since 2021, approaching $72 per barrel, Trafigura’s head of oil, Ben Luckock, anticipates that prices may soon fall into the $60s, down from a peak of $91.17 in April.
Morgan Stanley has revised its price forecasts for Brent crude downward for the second time in recent weeks. However, there are concerns that these lower prices might not benefit drivers. Last week, AA figures showed petrol prices at their lowest in three years, but the motoring group cautioned that further decreases could be offset if the Government decides to eliminate the 5p fuel duty cut in next month’s Budget.
Since early July, oil prices have dropped amid worries about demand from the US and China, while the Opec+ coalition has maintained its long-term goal of increasing production through the next year.
Oil outlook ‘weakest since 2011’
Trader sentiment in the oil market has hit its lowest point in 12 years due to concerns about demand.
The “new long position” among oil traders—indicating the proportion of those expecting prices to rise—has dropped to its lowest level since 2011, according to the ICE Exchange.
Ole Hansen, Saxo’s head of commodity strategy, explained that a nearly 7% decline in crude prices, breaching technical support levels, led to a mix of long position liquidations and increased short selling. This shift has resulted in the combined net long positions in WTI and Brent crude falling to their lowest in 12 years.
Persistent weakness in the refined fuel market has also contributed to a rise in net short positions in London and New York diesel futures. Overall, the net long positions across the five major crude and fuel contracts have decreased to their lowest since 2011, when the ICE Exchange began tracking Brent and gas oil data.
