Due to the slowdown in China's economic growth and the strengthening of the US dollar, international oil prices continued to fall from a 10-month high on Friday, offsetting to some extent the impact of Saudi Arabia and Russia extending the production cut agreement. Brent crude futures fell by about 0.6% to $89.41 per barrel, while West Texas Intermediate (WTI) futures fell by about 0.7% to $86.29 per barrel.
On Tuesday this week, after Saudi Arabia and Russia announced the extension of the production cut agreement until the end of this year, WTI and Brent, the two major international benchmark crude oil prices, both rose to a 10-month high due to concerns about a shortage of oil supply in the second half of the year.
Phillip Nova's Senior Market Analyst Priyanka Sachdeva pointed out that although the extension of the production cut agreement by Saudi Arabia and Russia supports overall oil prices, the uncertainty of China's economy and the strength of the US dollar are exerting pressure on oil prices in the short to medium term.
Tatsufumi Okoshi, Senior Economist at Nomura Securities, mentioned that although concerns about supply caused by the extended production cut agreement have driven recent oil price increases, profit-taking after continuous increases is becoming a significant obstacle to further rises in oil prices in the short term.
Against a backdrop of continuing tight supply, further increases in international oil prices require support from global demand growth, particularly demand growth stemming from prospects for the Chinese economy. However, investors generally believe that despite China's implementation of a series of stimulus policies recently, there are no clear signs yet that these policies have taken effect.
Data shows that due to factors such as weak overseas demand and domestic consumer spending, China's overall exports and imports both declined to some extent in August, reflecting the pressures faced by businesses in various sectors in China. Additionally, consumption, exports, and investment have always been considered the "three engines" driving China's economic growth continuously. However, recent data reveal pessimistic trends in overseas exports, as well as domestic consumption and investment, raising concerns.
Moreover, due to seasonal maintenance at Russian refineries, Russia is expected to increase its crude oil exports in September, which could weaken the support for oil prices from the extended production cut agreement.
This week, the support for oil prices from the extended production cut agreement is being offset by pessimistic demand expectations triggered by the slowdown in China's economy. This has introduced significant uncertainty into the continuing rise in WTI and Brent crude oil prices, and a decline by the end of this week is not ruled out.
