Oil prices continued their downward trend today, albeit at a slower pace.
After tumbling 5% on Monday, Brent crude benchmark is trading at $82.72 a barrel, bringing it to the lowest levels since early March.
Markets are now accounting for supply increase when the Strait of Hormuz reopens as part of the announced US-Iran peace deal.
One fifth of the global oil shipment was passing through the vital waterway before the war.
“I don’t expect the oil prices to be plunging lower at this moment in time,” market analyst Paul Sommerville told RTÉ’s Morning Ireland programme.
“Brent is trading at around $83. If it went below $80, that would be quite a surprise at the moment.”
The expert explains that markets are looking at several other things besides the reopening of the Strait of Hormuz – most importantly China replenishing its oil inventories.
“One of the things that has been capping oil prices is the Chinese demand. China has been using their inventories to put a cap on oil prices, really helping the global economy,” he said.
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According to today’s figures, China’s retail sales fell last month for the first time in more than three years – 0.6% year-on-year drop in May.
“The Chinese economy is not doing particularly well, and that is putting downward pressure on oil prices,” Mr Sommerville added.
Looking back at the over three months of the war and its impact on the global economy, the analyst argued that “stock markets are doing very well because they’re looking at other things” – particularly the “AI revolution” and blockbuster debuts like SpaceX’s IPO.
Markets “are not focused on the war because we know that Donald Trump has lost his appetite completely for the war”, Mr Sommerville said.