Oil Prices Slide

Oil prices slid during yesterday’s session as markets considered rising supplies and dampened demand. WTI fell close to 5% yesterday, with the subsequent fall this morning pushing prices below $69 dollars per barrel. This brings the index to its lowest level since December 2023, and marks a considerable move from April’s year-to-date highs when prices rose above $86 dollars per barrel. According to Bloomberg a deal which could “resolve a dispute” between factions in the Libyan government appears to be “imminent”. Given that such a resolution could lead to a renewal of output from Libya, markets have considered the impact that the increase in supply could have on wholesale prices. Markets also continue to consider demand-side concerns from the world largest importer of crude oil, China. Given that China imports some 25% of the world’s crude oil, Chinese factory orders sinking to a six-month low in August renewed demand concerns.

Yesterday’s release of global PMI figures pointed to a continuation of the decline across manufacturing. Yesterday, the Global Manufacturing PMI fell from July’s figure of 49.7 to 49.5, which though marginal was nonetheless the greatest decline since December 2023. According to Chief Business Economist at S&P Global Market Intelligence, Chris Williamson “the deterioration points to a halting of the manufacturing recovery seen in the first half of the year, which had seen the sector’s best performance for two years.” Yesterday’s data also indicated that global exports fell for a third successive month, suggesting a fall in global trade flows, while demand a fall in confidence impacted demand.

According to data from the Australian Bureau of Statistics, Australian economic output expanded 0.2% on a quarterly basis over Q2. While this marked the 11th consecutive quarter of economic growth, it nonetheless fell shy of expectations. On an annualised basis, the Australian economy expanded 1%, marking the lowest rise in output over the course of a year since 2020. As we looked at in August, slowing growth and a cooling labour market mean that the RBA continue to navigate a precarious monetary policy tightrope. Commenting on the “highly uncertain” economic outlook Bullock said that “even though growth in the economy has been weak, the level of demand for goods and services is still higher than the ability of the economy to produce those goods and services.”