ISLAMABAD: Oil futures maintained their losing streak for the second consecutive week on concerns about China’s slowing economic growth and the possibility of more US interest rate hikes. Both major global benchmarks Brent and West Texas Intermediate (WTI) ended the week lower by 0.38 percent and 1.75 percent, respectively. Brent, the international benchmark for two-thirds of the world’s oil, eased to $84.48 from $84.80 a barrel, showing a decrease of $0.32 on a week-on-week (WoW) basis. The WTI, the main oil benchmark for North America, edged down to $79.83 from $81.25 a barrel on a weekly basis, registering a weekly loss of $1.42. TLTP
On the other hand, Arab Light prices witnessed a decrease of $0.03 (-0.03 percent) to reach $88.05 from $88.08 a barrel on a weekly basis. Similarly, the price for Opec Basket decreased to $85.71 from $86.17 on a week-on-week basis, showing a loss of $0.46 (-0.53 percent). However, the price of Russian Sokol increased by $0.17 (+0.22 percent) to $78.69 from $78.52 on WoW basis.
A recent batch of economic data from China, the world’s second largest oil consumer, has highlighted a rapid loss of economic momentum since the second quarter. China’s sputtering economy has whipsawed global financial markets in the past few months, with a property crisis spooking investors amid contagion fears.
Oil prices recorded their second straight weekly loss as US Federal Reserve chairman Jerome Powell indicated the possibility of further interest rate increases to curb inflation. Oil prices recovered a little towards the back end of the week after coming under some pressure this month. Supply cuts from Opec+ continue to support the market, but uncertainty over the global economic outlook – sluggish recovery in China, possible recession in the US and Europe – are weighing a little.
At the Jackson Hole symposium in Wyoming on Friday, Powell said the Fed would continue to bring inflation down to its 2 percent target. The US economy is not cooling as expected, with stronger-than-anticipated gross domestic product growth and “especially robust” consumer spending, he said. “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down towards our objective.”
On the local front, persistent fall in the value of the rupee against the US dollar is likely to jack up petroleum products prices by over Rs20 per litre in the next fortnight review due on August 31. The exchange rate of the greenback has increased by Rs12.86 from August 16, 2023 to August 25. This means that petrol and diesel prices from September 1 would increase only because of the exchange rate. However, in the international market, the prices of POL products and crude stayed comparatively lower. While only three working days are left in the ongoing fortnight, a further increase in dollar’s value remains on the cards.
In the last two fortnights, the petrol price has already increased by Rs37.50 and diesel by Rs40 per litre. However, under the latest scenario, the dollar’s interbank value crossed Rs300 mark with the open market value at Rs316. The purchase of crude and POL products at higher values of US dollars would cause a further increase in petrol and diesel prices in the first fortnight of September which may climb to double digits.
