As oil dips to $113 a barrel, two more positive catalysts are fueling the freefall:
- The International Energy Agency (IEA) cut oil demand forecasts, while reporting increased supply
- Russia called a halt to military action in Georgia.
While the Russian-Georgian conflict remains volatile, traders had largely been focused on improving supply and demand fundamentals anyway. The IEA’s report confirmed investors’ suspicions (FT):
Amid the economic slowdown in the US, [the IEA] cut its global oil demand growth to 790,000 barrels a day, down from July’s estimate of 890,000 b/d….
The slowdown in global demand growth has come as production, particularly from Opec, jumped. The cartel pumped in July about 32.8m b/d, a record high, thanks to increases in supply from Saudi Arabia and Iran.
In just over a month, oil has fallen about $35 from its $147 high. Let’s just hope the reason for the fall is something other than global economic collapse.
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