| The Brent-WTI spread returned to its historical average of $4-$8 (Figure 1), after previously dropping below $2.3. This suggests that speculators attempted to capitalize on short-term gains from undervalued Brent contracts before prices reverted to their historical range.
WTI crude oil futures rose nearly 2% to around $76 per barrel on Thursday, driven primarily by strong economic data from the US and supply disruptions in Libya. The US economy showed slightly better growth in the second quarter, boosting investor confidence. Meanwhile, Libya halted operations at five key export terminals, cutting its oil output by more than half, which could lead to a significant reduction in global demand. |
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Figure 1. Brent – WTI spread, US Commercial Stocks (thousands of barrels) Despite these gains, oil prices are still on track for a monthly decline, partly due to persistent concerns over China’s slowing economy, which is likely to miss its growth targets and could weaken demand in Asia. Additionally, both Goldman Sachs and Morgan Stanley recently lowered their 2025 oil price forecasts, citing expected surpluses as China’s economic recovery loses momentum. Major banks have adjusted their price forecasts due to slowdowns in key markets like China, where economic malaise and the shift to electric vehicles are reducing fuel consumption. In Europe, diesel demand is also expected to drop below pre-pandemic levels due to weak manufacturing and changes in the car fleet. These bearish signals are counteracting previous gains, driven by geopolitical risks and supply threats, contributing to the overall downward pressure on prices. Moreover, the latest EIA data showed a modest decrease of 0.846 million barrels in US crude oil inventories last week, falling short of the anticipated 3-million-barrel decline. |