Oil Has Performed Poorly This Week

Brent crude oil has performed poorly this week, with the front-month contract falling by nearly eight percent to reach around $67 per barrel.

That’s what analysts at BMI said in a BMI report sent to Rigzone by the Fitch Group on Friday, adding that the initial sell off was triggered by the OPEC+ announcement that it would raise supply by an additional 547,000 barrels per day in September, “marking the full unwinding of the 2.2 million barrels per day of cuts that the group planned to reintroduce to market over 2025 and 2026”.

“Meanwhile, tariff-related uncertainties and broad-based economic concerns loom large, exacerbated by the recent raft of tariff announcements and weak economic data releases in the U.S. raising concerns for oil demand at a time when supply is continuing to grow,” they added.

The BMI analysts also noted in the report that bearish sentiment helps to explain the decline seen in Brent in response to U.S. President Donald Trump’s new executive order (EO) issued August 6, which they highlighted “introduces an additional 25 percent tariff on India, effective August 27, in response to its continued purchase of Russian oil, and establishes a process for extending similar penalties to other countries”.

“All else equal, the EO should be bullish for prices, to the extent that it curbs flows from Russia, the world’s second largest net exporter of oil,” they said.

“However, market participants seem to share our view that there is ample scope for Trump to reverse course in response to potential concessions from Russian President Vladimir Putin,” they added.

The analysts went on to state in the report that some combination of the loosening of the global oil supply and demand balance, potential pushback from India, economic fallout from higher effective tariff rates, and the rerouting of Russian oil to other markets could also help to cushion prices, depending on how the next 20 days play out.

“We hold to our current forecast for Brent crude to average $68 per barrel in 2025 and $67 per barrel in 2026, down from $80 per barrel in 2024,” the BMI analysts said in the report.

In a market analysis sent to Rigzone on Thursday, Hani Abuagla, Senior Market Analyst at XTB MENA, said crude oil prices stabilized to a certain extent that day “after multiple sessions in the red”.

“The market could remain exposed to more volatility as traders continue to monitor the developments around demand and supply,” Abuagla warned in the analysis.

“The market could remain under pressure from production increases by OPEC+ countries. At the same time, increasing pressure from the U.S. on Russian crude importers could limit the availability of oil on the market, driving prices higher,” Abuagla added.

The Senior Market Analyst at XTB MENA went on to state in the analysis that, on the demand side, “markets could find support in the higher than expected U.S. inventory draws”.

“Both API [American Petroleum Institute] and EIA [U.S. Energy Information Administration] figures showed that crude stocks declined faster than anticipated, which could support a more bullish view on demand in the United States,” Abuagla said.

“At the same time, traders could continue to monitor the state of the economy in the U.S. and other major oil consumers in a bid to assess demand levels, in particular as U.S. tariffs could affect growth on a global level,” Abuagla warned.

“Meanwhile, potential developments in U.S.-Russia diplomatic talks could reduce risks on the market, weighing on prices,” Abuagla continued.

Rigzone has contacted OPEC, the White House, and the Department of Information and Press of the Russian Ministry of Foreign Affairs for comment on BMI’s report and Abuagla’s market analysis. Rigzone has also contacted India’s Ministry of External Affairs for comment on BMI’s report. At the time of writing, none of the above have responded to Rigzone.

U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve (SPR), decreased by three million barrels from the week ending July 25 to the week ending August 1, the EIA highlighted in its latest weekly petroleum status report. That report was released on August 6 and included data for the week ending August 1. 

To contact the author, email andreas.exarheas@rigzone.com