Oil News: Brent Dips Below $80 as China’s Economic Woes Dampen Global Demand Outlook

Oil Prices Forecast: Brent Falls Below $80 Amid China Concerns

Light crude oil futures are sharply lower on Friday and in a positon to finish the week with a loss as economic concerns in China outweighed geopolitical risks. Brent crude fell below the critical $80 per barrel level, driven by disappointing economic indicators from the world’s largest oil importer.

At 15:00 GMT, Light crude oil futures are trading $75.29, down $1.70 or -2.21%.

China’s Economic Woes Pressure Oil Markets

China’s economic slowdown has become a significant concern for global oil markets. Premier Li Qiang’s recent remarks underscored the need for substantial efforts to revive the economy, with a focus on boosting domestic consumption. However, the latest data paints a bleak picture: new home prices fell at their fastest rate in nine years, industrial output slowed, and unemployment rose. The impact is visible in the oil market, as Chinese refineries cut crude processing rates sharply in July due to weak fuel demand.

Shift in Brent Futures Curve Indicates Softer Market

The Brent futures curve is showing signs of weakening, with a reduction in backwardation—a market condition where current prices are higher than future prices. This shift suggests traders expect a more balanced supply-demand outlook, largely influenced by weaker Chinese crude import data and lower refinery runs. The softer market outlook aligns with OPEC’s recent downward revision of its oil demand forecast for 2023, citing reduced expectations for China.

Libyan Oil Flows Add to Supply Pressure

Adding to the bearish sentiment, Libya’s Waha Oil Company resumed flows to the Es Sider port after completing maintenance on a critical pipeline. This increase in supply further weighs on prices, as it alleviates some concerns over geopolitical disruptions.

Market Outlook: Bearish on China Slowdown and OPEC Adjustments

Looking ahead, Brent crude prices may remain under pressure, especially if China’s economic challenges persist. The market’s focus will likely shift to the U.S. Federal Reserve’s September meeting, where a decision on interest rates could significantly influence oil prices. While U.S. economic data provided some support, the broader outlook remains bearish, with China’s slowdown and increased supply from Libya continuing to exert downward pressure on the market.

Technical Analysis

Light crude oil futures are trading sharply lower on Friday after failing to overcome the 50-day moving average at $77.02 earlier in the session. This indicator is new resistance. If the downside momentum continues then look for a test of the 200-day moving average at $74.30.

Holding inside the moving averages will create a choppy, two-sided trade. However, a sustained move under the 200-day MA could trigger an acceleration to the downside with $72.19 the next likely target.