Brent crude slumped to a 13-month low below $103 a barrel on Friday as an unstable European economy increased concern about demand in a well-supplied oil market. Growth in France and Germany was at standstill in the second quarter, and the disappointing data came just days after news that indicated oil demand in China, the world's second-largest oil consumer, fell 6 percent in July from June.
According to Jonathan Barratt, chief investment officer at Sydney-based wealth management firm Ayers Alliance, “The negative economic view is bearish, particularly in Europe, and that should be a major headache.” He further noted that the geopolitical events of the last two months was not driving prices the way they ought to, an indication that the supply dynamic is being recognized by the market.
Mike Wittner, the head of oil market research at Societe Generale SA, New York, in his view opined that the crude oil market is oversupplied. “There’s plenty of crude throughout the Atlantic basin and demand just isn’t that strong. Supplies have been ample in the U.S. and are now comfortable elsewhere as well,” he said. With Libya on the verge of reopening its eastern oil ports, OPEC's July production which was at a five-month high of more than 30 million barrels per day is set to rise, further increasing the world’s crude oil production.