Fears of recession in key oil purchasing nations have pulled crude oil prices to their lowest point since the start of the year, but the move lower could be capped as major producers adjust supply.
Brent crude fell below $85 per barrel on Monday for the first time since January.
“One of the key reasons that crude has come off is the fear of recession,” said David Lennox, resource analyst at Fat Prophets. “That will obviously see demand destruction in the oil sector and, with that, we’re likely to see weaker prices.”
However, Lennox expects that the downside will be capped. “I don’t think the OPEC (Organization of Petroleum Exporting Countries) are comfortable with oil prices where they are, so we might see some action from them to withdraw production rather than adding.”
The oil cartel and its allies will meet next on Oct. 5 to discuss output.
XM Australia’s Peter McGuire, on the other hand, expects prices of brent crude to fall further to $75 per barrel in the near term on the back of weak global demand, exacerbated by the rise of the dollar.
BQ Prime spoke with both the experts to identify the key trends in the global crude oil market.