Crude prices have had something of a choppy week, though the front WTI contract is, just about, set to eke out a second straight weekly gain, for the first time since early-July, as the trading week draws to a close.
Receding US recession concerns have come to the aid of crude bulls this week, with better-than-expected retail sales and jobless claims figures allaying fears of a more rapid than expected deterioration in US economic conditions.
Nevertheless, the production side of the US economy does continue to face headwinds, with industrial production having fallen by a worse-than-expected 0.6% MoM in July.
Lingering geopolitical risk is also helping to keep a floor under crude prices, as market participants continue to monitor, and await, a potential Iranian response to the assassination of a Hamas leader in Tehran two weeks ago. While such retaliation has yet to eventuate, the continued threat of such action is likely denting the appetite of participants to take on significant short positions, particularly ahead of the weekend trading break.
Nevertheless, geopolitical risk premium can only underpin crude for so long, with a sustained rally in both Brent and WTI likely requiring a significant, and synchronised, pick-up in global demand, which remains elusive.
Finally, participants also continue to monitor the latest OPEC developments, after the Cartel cut its 2024 demand forecasts this week, largely due to softening demand in China, ahead of plans to phase out current output cuts in Q4. Plans which, given recent forecasts, may now be postponed into the new year.
