Crude oil prices fell this week on the second trading day in a row due to weak economic data from both China and the United States.
WTI futures price fell below $70 per barrel for the first time since December 2023, while Brent futures fell below $74 per barrel, a level not seen for nine months.
Both indicator oil futures since their last peak on August 27 %It has fallen more than 10 times.
While the wave of sales in Nvidia-led technology stocks has led to a collapse in global markets, the risk-avoidance trend has also contributed to the downward pressure on the oil market.
The CBOE Volatility Index, known as the fear indicator of the markets, rose above 20 ⁇ , the highest level in a month, as investors fled risky assets with increasing fears of recession.
By the end of August, the escalation of the military conflict between Iran and Israel and the production cuts in Libya had caused oil prices to rise.
But while concerns of a wider regional war have waned, fears of a recession have precluded geopolitical tensions, and a possible solution to the Libyan conflict is expected to restore oil production.
Fears of recession are rising
A series of disappointing data from the U.S. has raised concerns that economic conditions are deteriorating and oil demand will weaken.
The world's largest economy reported a weaker-than-expected Manufacturing Purchasing Managers' Index (PMI), which pointed to four consecutive months of contracting factory activity in August.
JOLTS job postings data released on Wednesday showed that the number of available jobs has fallen to its lowest level since January 2021.
Deteriorating economic data significantly increased the likelihood of a deeper interest rate cut by the Federal Reserve next month, with U.S. 2-year and 10-year government bond yields briefly shifting to positive territory after their reversal for the second time since 2022.
Short-term government bond yields are generally more susceptible to changes in interest rates in the near term.
Historically, economic recession tends to occur when the difference between the two indicators U.S. government bond yield shifts back to the positive zone after reversal.
In addition, China, the world's largest oil importer, reported a weaker-than-expected Manufacturing PMI over the weekend, showing that factory production continued to contract for the third consecutive month in August.
China's Caixin Services PMI, announced on Wednesday, also fell short of expectations, showing that the country's economic recovery continues to weaken.
OPEC+ could delay production growth
According to Reuters, OPEC+ may postpone its planned production increase in October in the face of falling oil prices.
The organization had previously agreed to increase production by 180,000 barrels per day as part of its plan to phase out production cuts.
Ongoing production cuts may provide some support to the weakening crude oil market, but this news did not push prices up immediately due to a tendency to avoid the current risk.
In June, OPEC and its allies agreed to extend production cuts of 3.66 million barrels per day until the end of 2025, with voluntary cuts continuing through September this year.
The world's total oil supply %The organization, which provides more than 37 ⁇ , has been reducing production since 2022 ⁇ , and this is the reason why global demand %It caused a daily cut of 5.86 million barrels, which corresponds to 5.7 ⁇ .
