While the Brent crude is inching closer to $87 a barrel, it is unlikely to rise much higher from here as there is uncertainty of demand with global economy expected to slow down, according to commodity expert Jonathan Barratt.
Brent has risen 2.86% in the past month and 17.90% since June to $86.42 per barrel Sept. 1.
One of the factors behind the price rise is the crude oil production cuts by OPEC countries as well as Russia, Barratt, chief executive officer at CelsiusPro AG, told BQ Prime. Russia has again reached an agreement with OPEC+ partners to decrease oil exports, with the new parameters to be announced next week, Reuters reported.
Saudi Arabia has also extended its existing voluntary oil output cut of one million barrels per day for another month through September.
And Hurricane Idalia, which is expected to reach Florida, U.S. in the coming week, might have an impact on energy supply and demand, leading to supply-backed price rises, according to Barratt. As a result, Brent crude has risen to $87.03 per barrel from under $84 per barrel just a week ago.
While $87 is a critical resistance, the weight of economic performance and macroeconomic data will stop it from moving very high, Barratt said.
Economic slowdown and weak macroeconomic data from China, the world's largest crude importer, have an impact on crude prices and demand, he said. Rising interest rates, economic slowdown, and China's weak manufacturing data do not provide enough demand to push prices up, he said.
India's crude imports from Russia fell almost 24% month-on-month in August as the fuel discounts generally enjoyed by India declined, owing to rising Brent oil prices.
The market is, however, expecting China to announce an economic stimulus policy, Barratt said. In 2007, during the global slowdown, China put out a $560 billion stimulus package and was effectively the first economy to come out of that slowdown, he said.
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