Oil prices faced a slight decline in Asian trade on Thursday, influenced by a series of weak Purchasing Managers’ Index (PMI) readings that raised concerns about sluggish economic growth. The market also grappled with increased U.S. oil production and exports. Indicating that supply might not be as constrained as initially anticipated.
The Energy Information Administration (EIA) reported that U.S. crude output approached pre-COVID levels last week, while exports witnessed a rise.
This trend, coupled with data revealing an unexpected surge in U.S. gasoline and distillate inventories, overshadowed a larger-than-expected drawdown in crude inventories. As a result, oil prices hovered near their lowest point in almost a month. On track for a fourth consecutive day of losses.
The weakening dollar provided limited respite to oil prices as markets remained cautious ahead of insights on U.S. monetary policy from the Jackson Hole Symposium on Friday.
U.S. crude output reached approximately 12.8 million barrels per day (mb) in the week ending August 18. Inching closer to the record 13.1 mb seen before the COVID outbreak. Meanwhile, over 10 mb of last week’s output contributed to exports. As U.S. producers sought to bridge gaps left by Saudi and Russian supply cuts.
Market dynamics were further influenced by ongoing negotiations between Turkish and Iraqi energy ministers concerning the resumption of oil exports from the Kurdish region. Potentially releasing 450,000 barrels per day.
Amid these shifts, concerns persisted about slowing crude demand in China due to a decelerating post-COVID economic recovery.
The Chinese government’s cautious approach to stimulus measures raised investor impatience. Similarly, weak Purchasing Managers’ Index readings from both the U.S. and the euro zone intensified apprehensions about the impact of slowing economic growth on oil demand.