Oil prices continued to slump on Tuesday, remaining below the $100 mark on demand concerns amid signs of slowing economic growth worldwide before the start of the Opec+ meeting this week.
Brent, the global benchmark for two thirds of the world's oil, was trading 0.74 per cent lower at $99.29 a barrel at 9.08am UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 0.61 per cent at $93.32 a barrel.
On Monday, Brent touched $99.09 a barrel, its lowest since July 15 while WTI dropped to $92.42 a barrel, its weakest in two weeks, on weak manufacturing data from China, the world’s largest importer of oil.
Prices fell as recessionary fears continue to weigh on the market after growth slowed in many parts of the world, including in China, as Covid-19 pandemic related restrictions stemmed output in the country.
“Oil prices plummeted on the start of a new trading month, with October Brent down about 4 per cent to $100.03 per barrel and pushing lower in trade today,” said Edward Bell, senior director of market economics at Emirates NBD.
“The Opec+ meeting tomorrow will be the focus for oil markets and whether the producers’ alliance will respond to requests for higher oil output.”
The super group of oil producers, which includes Russia, will meet online on Wednesday to decide on its output policy for September and beyond after unwinding record output cuts put in place during the pandemic.
“Since the start of the Opec+ deal, oil prices have rallied more than 330 per cent, from $25 per barrel for Brent futures at the end of April 2020 to $110 per barrel at the end of July 2022,” Mr Bell said.
“A disciplined approach to adding barrels back to the market, along with a recovery in demand and draining of inventories, have all helped to establish a solid fundamental floor for high oil prices.”
But a “hazy” demand outlook, given slowing global economic growth as monetary policies tighten to curb the sharp rise in inflation, and supply constraints caused by Russia's continuing military offensive in Ukraine, have meant the market remains subject to volatility.
“An agreement on higher oil output for September onward still seems likely as an outcome at the meeting this week. But in order for Opec+ to preserve its integrity — and there has been no public statement from ministers that suggests it is in doubt — any agreement on higher production would have to include all members, even if the target levels are essentially notional,” Mr Bell said.
However, the market's fundamentals remain tilted in favour of higher prices.
“Our expectation that oil prices have entered a new era of relative scarcity remains unchanged and oil market fundamentals will support prices at higher levels than we have seen in the last few years,” he said.
“The improvement in oil prices since the peak of the pandemic should help to keep Opec+ ministers committed to the effectiveness of the alliance and, for now, we see no change coming for [the alliance].”