TOKYO – Global oil prices experienced a decline of over $1 on Monday, retracing the gains from the previous week. This drop was a result of concerns about China’s economy, which outweighed the positive impact of OPEC+ output cuts and the decrease in the number of oil and gas rigs in the United States.
By 0350 GMT, Brent crude had dropped by $1.15 or 1.5%, trading at $75.46 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude fell by $1.09 or 1.5% to $70.69.
Last week, Brent observed a gain of 2.4% while WTI rose by 2.3%.
Several major banks have revised their 2023 GDP growth forecasts for China due to weak May data. This indicates a slowdown in the recovery of the world’s second-largest economy after the COVID-19 pandemic.
BofA Global Research, for example, has lowered its 2023 China growth forecast following the disappointing May data.
Sources have revealed that China plans to introduce more stimulus measures by the end of this year to support its slowing economy. However, concerns about debt and capital flight will limit these measures to targeting weak demand in the consumer and private sectors.
Despite the economic challenges, China’s refinery throughput increased in May, reaching its second-highest level on record. This contributed to the gains seen last week in the oil market. Additionally, U.S. energy firms reduced the number of operational oil and natural gas rigs for the seventh consecutive week, a trend not seen since July 2020.
The decline in the oil and gas rig count is viewed as an early indicator of future oil production. The count fell by 8 to 687 in the week ending June 16, the lowest level since April 2022.
Furthermore, the voluntary output cuts implemented by OPEC and its allies, along with Saudi Arabia’s additional cut in July, continue to provide support to oil prices.
“There were also signals that the U.S. driving season would bring strong demand,” noted ANZ Research in a report. It highlighted that U.S. gasoline demand reached 9.24 million barrels per day last week, the highest level since December 2021.
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