Brent crude started August at $85/bbl, peaking at $87/bbl before ending the month virtually unchanged at $86/bbl. Despite OPEC+ supply constraints, alongside increased demand highlighted by the first EIA stock report in August showing a 17 million barrel draw in US crude inventories, prices remained relatively stable. The faltering economic recovery in China was exacerbated by weak exports and imports due to weak foreign and domestic demand, keeping a ceiling on oil prices. However, Brent crude peaked at over $87/bbl on the 9th of August, as escalating conflict in Ukraine ignited concerns of further supply disruptions. Meanwhile, Chinese authorities pledged to introduce policy measures towards the end of the month to boost the nation’s growth, however the measures have failed to convince markets of a stronger recovery thus far, causing Brent crude to close August at $86/bbl.

GBP traded at $1.276 against USD and marginally declined to $1.271 by month-end. The beginning of August saw investors backing the dollar, following stronger-than-expected US GDP data for Q2, causing GBP to fall below $1.27. The Bank of England’s decision to raise interest rates by 25bps to 5.25%, below market expectations of a 50bps hike, weighed on the sterling. However, mid-month wage data showed that earnings had increased at a record pace in Q2, whilst the unemployment rate increased to 4.2%. The consumer price index (CPI) fell to 6.8% in July, down from 7.9% in June, however remained well above the central bank’s target, increasing the likelihood of further monetary policy tightening. Additional economic data revealed low UK retail sales, largely attributed to poor weather in July reducing consumer spending, causing GBP to close August at $1.271.

After Rishi Sunak unveiled plans to expand North Sea oil drilling at the end of July, industry leaders from EDF, SSE and BP met in Downing Street at the beginning of August, to discuss net zero with Grant Shapps, the Secretary of State for Energy Security and Net Zero. The concerns surrounding reaching the net zero target were exacerbated mid-month, as the global offshore wind expansion target for 2030 was labelled as ‘unrealistic’ by energy research firm Wood Mackenzie, suggesting the government targets would require $27 billion in investment in the supply chain by 2026. Furthermore, the geopolitical landscape remains unstable, as the Russia-Ukraine war shows no signs of slowing after around a year and a half since the invasion. During the month, Ukrainian sea drones attacked a Russian navy base near the Black Sea port of Novorossiysk, before President Zelensky pledged to retaliate again if Russia continue to block Ukrainian ports. Meanwhile, Russia retained its position as India’s top supplier of crude oil despite output cuts, as data revealed that imports from Saudi Arabia declined by 34% in July.