Uncertainty over demand and supply levels affects oil prices

Oil prices continued to see strong volatility with traders monitoring the developments on the demand and supply sides. The market has been rebounding to a certain extent during the last few trading sessions after almost a month of price corrections.

While concerns about supply levels have provided strong support to the market for a while now, pushing the market to this year’s peak, weaker-than-expected Chinese economic recovery and declining manufacturing and services activity levels in the US and Europe have pressured prices.

Hopes of improving demand in China could boost markets to a certain extent, although uncertainty in this regard remains ever-present. Traders could monitor any new measures in the country to support the local economy.

Production cuts helped maintain the market on an uptrend overall despite the concerns around demand levels. In this regard, Saudi Arabia and OPEC’s decisions on production could continue to affect sentiment and prop up prices.

At the same time, concerns about monetary policy, as the US could potentially raise interest rates another time, could impact expectations. Another increase in interest rates could weigh on demand levels in the US and elsewhere.

Hopes of decreasing tensions between the US and Iran could help drive new volumes to the market. A positive diplomatic development could create some downward pressure on the market.