The Brent price dropped from 111 to 104 USD/bbl last week in its worst week since June. Brent has dropped by 15 USD since hitting a peak in February, due to weak economic growth and oil demand.
A slowdown in job growth is triggering concerns over the pace of economic recovery in the US. The Labor Department reported payrolls expanded by just 88,000 last month against market expectation of a 200,000 increase. The report sent US stocks and the dollar lower. Federal spending cuts have just begun and are expected to be a more substantial drag on the economy this quarter. It is expected that employment growth will slow somewhat in coming months. The Congressional Budget Office has estimated that tighter fiscal policy will subtract about 1.5 percentage points from economic growth this year.
Oil prices may draw support from geopolitical worries after the talks between Iran and western powers ended without a resolution. US Secretary of State John Kerry said yesterday that further talks over the nuclear programme will be pursued but stressed that the process could not go on forever. Israel has pushed for a deadline for military action and hinted that it would act alone if necessary.
Economic data from China this week will throw light on the pace of recovery in the world’s second biggest oil consumer.
Depleted stocks and continuing below-normal temperatures keep UK gas prices high despite diminishing demand. The drain on already exceptionally low British gas stocks is continuing despite the start of summer. Total stocks are well below 10% of the volume at the same time last year and below one day of demand. Prices are expected to start to come off with warmer weather, but any new outages or revised cold weather forecasts could make prices jump again.
Summer gas prices are being pushed upwards by the need to refill storage sites, lack of LNG supplies and reduced availability of gas due to maintenance. Any more delays to injections could mean that storage sites might not be sufficiently full by October