Oil prices have paused their decline due to concerns over Hurricane Francine, which has disrupted US offshore oil production in the Gulf of Mexico, says Li Xing Gan Financial Markets Strategist at Exness.
The storm has led to shutdowns of crude production facilities, sparking fears of a short-term supply crunch in a region crucial to US oil output.
However, several factors may temper a rebound in oil prices. A global economic slowdown and a weak demand outlook are significant headwinds.
The latest data from the EIA shows a rise in US oil stockpiles, up by 833 000 bbls for the week ending 6 September, 2024, indicating a weaker market. Additionally, OPEC has downgraded its 2024 global oil demand growth forecast, reflecting broader concerns about sluggish demand that could offset the effects of supply disruptions. Similarly, the International Energy Agency (IEA) projects weaker crude oil demand due to slower global growth and a shift towards clean energy sources.
In China, persistent economic challenges, including a downturn in the property sector, weak consumer sentiment, and deflationary pressures, continue to dampen growth prospects. Potential tariff risks and increasing trade barriers could further undermine China's export momentum. Consequently, the potential for a rebound in oil prices may be constrained, overshadowed by ongoing demand concerns.
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