Benchmark oil prices may soften further this week if official data confirm factory activity in China slowed to its slowest pace in 11 months, implying lower demand for primary inputs from the world's second-largest economy.
Despite correcting lower last week, both Brent and U.S. crude futures remain over $100 a barrel and many believe current prices are too high and don't reflect weaker global fundamentals of ample supply, tepid demand and slowing emerging market growth.
"I still feel we have a $5-8 premium in the market which is too expensive," said Jonathan Barratt, chief executive of Barratt's Bulletin, a commodity-markets newsletter in Sydney, who has a 'bearish' recommendation on the oil market this week. "I'm looking for August 1 China PMI for confirmation of the slowdown," Barratt said, adding he is 'short' the market or betting prices will fall. "The market is trading with economics."
Exactly three-quarters of those polled in CNBC's weekly sentiment survey (21 out of 28) believe prices will decline, 14 percent of respondents (four out of 28) say prices will gain while three are 'neutral'.
Oil markets face multiple event risks this week. Three major central banks (the Federal Reserve, the European Central Bank and the bank of England) hold policy meetings while scheduled U.S. data releases - including second-quarter GDP and July non-farm payrolls – will take on heightened prominence as investors scrutinize those numbers to determine when the Fed will scale back the pace of asset purchases.