December 7, 2023

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Oil is down more than 1% on growth uncertainty in China

Oil is down more than 1% on growth uncertainty in China

SINGAPORE (Reuters) – Global oil prices fell more than 1% on Monday, reversing last week’s gains, as questions about China’s economy overshadowed OPEC+ production cuts, and a seventh consecutive decline in the number of oil and gas rigs operating in China. United State.

Brent crude fell 78 cents, or 1%, to trade at $75.83 a barrel by 0655 GMT, after falling as much as $1.27 to $75.34.

US West Texas Intermediate crude fell 76 cents, or 1.1 percent, to $71.02, after falling $1.15 to $70.63.

Last week, Brent posted a gain of 2.4% and WTI rose 2.3%.

“Economic uncertainty in China may have triggered the sell-off after a two-day recovery in oil markets ahead of the People’s Bank of China (PBOC) decision on key loan interest rates (LPR) this week,” said Tina Ting, analyst at CMC Markets. .

A number of major banks have lowered China’s GDP growth forecasts for 2023 after May data last week showed that the post-COVID recovery in the world’s second-largest economy is faltering.

China is widely expected to cut key lending rates on Tuesday, following a similar cut in medium-term policy loans last week to support a fragile economic recovery.

Sources told Reuters that China will provide more stimulus support to its slowing economy this year, but concerns about debt and capital flight will keep measures aimed at supporting weak demand in the consumer and private sectors.

However, China’s refinery productivity in May rose to its second-highest total on record, helping to add to last week’s gains, and US energy companies cut the number of oil and natural gas rigs in operation for the seventh straight week for the first time since then. July 2020.

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The number of oil and gas rigs, an early indicator of future production, fell by 8 to 687 in the week ending June 16, the lowest level since April 2022. ,.

Oil prices on Monday are also lower amid expectations that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, or OPEC+, will struggle to comply with production quotas, said Edward Moya, senior analyst at OANDA.

“Rosneft proposes that the cartel of oil producers focus on exports, not production,” Moya said, referring to statements made by Igor Sechin, head of the major Russian energy company Rosneft.

Speaking at an economic forum on Saturday, Sechin said it would be appropriate for OPEC+ to monitor oil export volumes as well as production quotas due to the different sizes of each country’s domestic markets.

Earlier this month, OPEC+ agreed to a new oil production deal. Saudi Arabia, the group’s largest producer, also pledged to make a significant cut in its output in July.

(Reporting by Katya Golubkova in Tokyo and Emily Chao in Singapore; Editing by Tom Hogg

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