Plummeting Oil Prices: What to Expect? It All Depends on China and Iran

Oil Prices Drop Over 2% on Friday

On Friday, August 16th, the price of oil plunged, with losses exceeding 2%.
Currently, Brent futures are trading below $80 per barrel, down 2.05%, while WTI contracts are slipping by 2.26%, hovering around $76 per barrel.

Factors Influencing Oil Prices

Oil prices are under pressure and seem to be closing the week on a downward trend.
Earlier in the week, the U.S.
benchmark had surged over 4% due to concerns about a possible Iranian attack on Israel.
However, geopolitical factors have taken a back seat to the uncertain growth prospects in China, weakening future demand forecasts for black gold.

China vs.
Iran: Drivers of Oil Prices

Investors in commodities are closely watching two countries to understand whether oil prices will rise or fall: China and Iran.
Currently, it appears that China is exerting more influence, pushing oil prices lower.
But why does the Iranian factor remain in the spotlight?

During a government plenary session on Friday, Chinese Premier Li Qiang stated that significant efforts are needed to revive the economy, focusing on boosting consumption, as reported by state media.
This emphasizes China’s challenging path towards full recovery, which can also impact oil prices.

Recent data indicates a slowdown in the Chinese economy, with a rapid decrease in new home prices, slowing industrial production, rising unemployment, and refineries drastically reducing crude processing rates due to weak fuel demand.

Additionally, the OPEC has downgraded its demand forecasts for this year, citing weaker expectations from China.

Iran has also reemerged as a major player in the oil market.
Concerns about Tehran’s response to the killing of Hamas political leader Ismail Haniyeh by Israel had briefly spiked oil prices.
However, U.S.
crude oil futures dropped by 3% on Friday on reports that Qatar had warned Iran against attacking Israel amid ceasefire negotiations in Gaza.

The fluctuation in oil prices continues to swing between fundamentals and geopolitics, with the current downward trend partly driven by Middle East negotiations and Iran’s restrained reactions.

Future Outlook and Possible Influences on Oil Prices

Analysts suggest that the next significant shift in Brent crude prices may occur when the U.S.
Federal Reserve decides on interest rate cuts at its September meeting.
While China’s demand can suppress oil prices, potential Iranian actions in response to geopolitical events could lead to price spikes.
Positive signals of U.S.
demand recovery may support prices, especially with projected increased OPEC production.