Despite a big jump in oil prices Friday, Brent futures posted their biggest quarterly declines since 2008 on weak demand, ample supply and economic concerns.
Oil prices posted their fourth biggest daily gain Friday on optimism after euro zone leaders reached an agreement on an EU bank bailout deal. Weak factory data from the US, Europe and China pushed oil prices back down yesterday, on concerns that the world economy is deteriorating more quickly than anticipated. US factory activity fell to 49.7 from 53.5 the month before, much below expectations. The data followed similar assessments of factory activity across Europe and Asia, including China.
Iranian oil exports fell to their lowest level since 1989 in June, as sanctions aimed at pressuring Iran to give up its nuclear programme tightened. A report from Tehran said lawmakers wanted to block access to the Strait of Hormuz, route of a fifth of the world’s oil exports.
We expect oil prices to remain volatile, as escalating tensions with Iran and other geopolitical issues counteract gloomy economic data and weakening oil demand.