Oil Market Outlook

Oil prices posted a small weekly gain as recession concerns eased with news of a slight decline in US inflation, while improving economic data in the US and China lifted sentiment.

Investors are also weighing the prospect of higher oil demand this winter as Europe weans itself off Russian gas, while supplies remain tight as Opec+ members have limited spare capacity to lift output.

However, a large gain in US crude inventories kept a lid on oil price gains, as did revived hopes for a nuclear accord with Iran, which could lead to more Iranian oil entering the market.

West Texas Intermediate (WTI) crude rose $1.33 on the week to close at $92.09 per barrel. Brent gained $1.50 to $98.15 and Dubai crude averaged $98.09. Thaioil forecasts that WTI this week will trade between $84 and $95, and Brent between $89 and $100. Prices are expected to remain volatile as investors follow changes in supply and demand forecasts, as well as Covid-related developments, particularly in China. Among the factors expected to influence trade:

■ US inflation eased in July to 8.5% from 9.1% in June, leading some to believe the Federal Reserve may be able to ease off on large interest0-rate increases at its September meeting. However, some Fed members have said the fight against inflation if far from over.

■ Chinese consumer prices in July rose 2.7% yearon-year, after a 2.5% jump in June, on higher food and energy prices. The purchasing managers’ index (PMI), has slipped from 50 to 49.0, reflecting downturns in the industrial sector as Covid curbs continue to have an impact. The tourist island of Hainan over the weekend extended its Covid lockdown, while new restrictions were also announced in Lhasa in Tibet.

■ US crude inventories in the week to Aug 5 rose by 5.5 million barrels, higher than forecasts, reflecting worries that the economy is slipping into recession. However, inventories are is still about 5% lower than the five-year average, reflecting steady demand growth.

■ Problems linked to Russian gas supplies are continuing, which could push up oil consumption in Europe. Moldova has said it cannot afford to pay its gas supplier, Gazprom, and is seeking a deferral. Transneft has also suspended gas exports via the Druzhba pipeline through Ukraine due to payment issues.

■ Economic indicators to watch include secondquarter euro zone GDP, expected to show marginal growth of 0.2% from the previous quarter, while July inflation is projected to drop from the previous month. Chinese PMI for July is expected to slip further but retail sales are expected to show a slight improvement.