On Monday (August 19), international oil prices showed signs of weakness in the Asian market's early trading, hovering near their lowest point in over a week. U.S. crude oil September futures are currently trading at $76.37 per barrel, while Brent crude is hovering around $79.47 per barrel. Concerns about a slowdown in demand from the world's largest oil importer continue to weigh on investor confidence, causing oil prices to decline. Meanwhile, investors are closely watching the progress of ceasefire negotiations in the Middle East, which could affect supply risks.
Last Friday, Brent crude futures fell by $1.36, or 1.7%, to close at $79.68 per barrel. U.S. crude September futures dropped by $1.51, or 1.9%, to close at $76.65 per barrel. However, despite some turbulence last week, with U.S. data showing slowing inflation and strong retail spending, the weekly change in oil prices remained roughly flat.
"The continuous concern over slowing demand from major Asian economies has triggered a sell-off," said Hiroyuki Kikukawa, President of NS Trading. "However, supply risks due to tensions in the Middle East and the escalation in the Russia-Ukraine conflict continue to support the market." Last Thursday, data from major Asian economies indicated a weakening economic momentum in July, with new home prices falling at the fastest rate in nine years, slowing industrial output, and rising unemployment. This has heightened market concerns about declining demand in the region, leading its refineries to significantly cut crude processing rates.
The Organization of the Petroleum Exporting Countries (OPEC) announced last Monday that it has lowered its oil demand growth forecast for this year due to the region's weak economy. The International Energy Agency (IEA) also cut its oil demand growth forecast for 2025 last Tuesday, similarly citing weak demand from major economies as the main reason.
Andrew Lipow, President of Lipow Oil Associates, stated, "This week, the oil market will face multiple uncertainties: on one hand, an escalation in Middle East conflicts could lead to supply disruptions; on the other hand, the slowdown in economic growth in major economies is prompting related agencies to lower demand forecasts."
Meanwhile, U.S. Secretary of State Blinken arrived in Tel Aviv on Sunday to begin his latest Middle East visit, hoping to push for a ceasefire in Gaza. However, just hours after his arrival, Hamas accused Israel of sabotaging mediation efforts. Mediating countries such as Qatar, the U.S., and Egypt have not yet reached an agreement after months of negotiation, and violence in Gaza continued on Sunday. A new round of ceasefire talks began last Thursday in Qatar and is currently on hold, but it is expected to resume this week with mixed progress.
Additionally, according to Lebanon's National News Agency, the Israeli Defense Forces carried out airstrikes on multiple locations in southern Lebanon on the 18th, causing casualties. Hezbollah in Lebanon claimed to have attacked Israeli military facilities. The Israeli military stated that it hit targets including Hezbollah's weapon depots. Lebanon's National News Agency also reported an Israeli drone strike in southern Lebanon, which resulted in one death.
This week, market sentiment might be influenced by the Federal Reserve's Jackson Hole Economic Symposium. Global central bank officials will speak during the conference. The preliminary values for the Purchasing Managers' Index (PMI) of major economies and the Loan Prime Rate (LPR) from major Asian economies will determine the direction of financial markets this week. Federal Reserve Chairman Powell is expected to speak on the economic outlook on Friday. Despite a slowdown in U.S. inflation, it remains stubborn, and with a weak job market, Powell may hint at a dovish turn in future monetary policy, though he is unlikely to endorse expectations for steep rate cuts.
The Federal Reserve's July meeting minutes will be released on Wednesday, and Fed Governor Waller and Atlanta Fed President Bostic will also deliver speeches. Important economic data will be released this week, including initial weekly jobless claims, the preliminary August S&P Global PMI, and July's existing and new home sales data.
In Europe, the final July Harmonized Index of Consumer Prices (HICP) and current account data will be released on Tuesday. The preliminary August PMI and consumer confidence data will be published on Thursday. The European Central Bank will release the minutes of its July monetary policy meeting, and the Swedish central bank will announce its monetary policy decision. In the UK, there’s relatively little economic data this week, with the key focus being the preliminary August PMI. Bank of England Governor Bailey will speak at Jackson Hole, potentially providing policy hints for a rate cut in September following mild inflation data.
Japan will release trade data, the preliminary PMI, and the national consumer price index (CPI) for July this week. Following last week’s GDP data showing that consumption growth may support another rate hike by the Bank of Japan, the CPI data could be a critical factor.
The loan prime rate (LPR) from major Asian economies is expected to remain unchanged on Tuesday, despite new home prices in July falling at the fastest rate in nine years.
This week's trading focus will remain on geopolitical developments and statements from Federal Reserve officials.
From a technical perspective, Brent crude has continued to retreat after encountering dual resistance from the 200-day and 55-day moving averages. It has now fallen below all moving averages, indicating a bearish technical outlook. In the short term, it may further test the support level near the August 8 low of 77.63; resistance above is focused around the 5-day moving average of 80.17.
