BNR – Oil prices fell on Monday as concerns about the Chinese economy going past OPEC+ output reductions.
By 0944 GMT, Brent crude had fallen 17 cents, or 0.2 per cent, to $76.44 per barrel. West Texas Intermediate (WTI) crude in the United States fell 31 cents, or 0.4 per cent, to $71.47. Last week, both contracts finished with gains of over 2 per cent.
“(China’s) economy is navigating through powerful headwinds,” said PVM oil analyst Tamas Varga. “The property market has not healed from last year’s slump.”
China Growth Uncertainties
Several large banks have reduced their forecasts for China’s GDP growth for this year. This came after May data indicated that the globe’s second-biggest economy following COVID recovery was faltering.
On Tuesday, China is highly projected to lower its benchmark loan rates. Last week, the country reduced medium-term policy loans in a similar manner in order to support an unstable economic recovery.
According to sources, China will provide more motivation to its slow economy this year. Concerns about debt and capital flight, on the other hand, will keep the measures focused on consumers and the private sector.
In May, China’s refinery output reached its second-highest level on record. This contributed to last week’s profits.
Furthermore, for the first time since July 2020, US energy companies reduced the number of active oil and natural gas rigs for the seventh consecutive week.
The number of oil and gas rigs is a precursor of future production. It fell eight points to 687 in the week ending 16 June, the lowest overall since April 2022.
Iranian Oil Exports
The rise in Iran’s oil exports weighed on prices as well. Despite US sanctions, Iran’s crude exports and oil production have reached all-time highs in 2023. This increased global supply at a time when other producers are restricting production.
This month, the Organisation of Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed on a new oil production agreement.
In addition, the group’s largest producer, Saudi Arabia, announced a significant reduction in output in July.