Jean-Pierre Durante, Head of Applied Research Pictet Wealth Management.

Weak economic activity weights on oil prices

Global oil supply has continued to increase over the past three months (by 1.6mbd).

Meanwhile, the global economic slowdown has depressed oil demand (-2mbd in the last five months).

As a result, the global oil market has remained in slight oversupply (+0.4mbd on average in 2022).

As we expect economic activity in advanced economies to ease further during the rest of the year and the Chinese economy is likely to continue to be dragged down by its property sectors and zero-covid policy, the growth in oil demand should remain modest in the months ahead, helping dampen oil prices. The barrel of Brent could temporarily test the USD75-USD90 range.

If weak demand lasts, OPEC+ is likely to act swiftly to curtail supply. As a result, we expect oil prices to rebound after a temporary bout of weakness. We are revising our year-end forecast for Brent to USD100 per barrel from USD110 previously.