Oil prices fell on Monday, halting five-day gains as investors took profits after a report of slowing economic activity in China, the world’s largest importer of crude oil. The report rekindled concerns about the decline in global fuel demand.
Brent crude futures for the December settlement were down as much as 1.1% and were last down 85 cents, or 0.9%, to $97.07 a barrel as of 0500 GMT.
West Texas Intermediate (WTI) crude for November delivery fell as much as 1.1% to $91.84 a barrel, down 80 cents, or 0.9%.
In September, service activity in China contracted for the first time in four months as COVID-19 restrictions impacted demand and business confidence, data released on Saturday.
The slowdown in China’s economy, the world’s second-largest oil consumer after the United States, raises growing concerns about a possible global recession, triggered by multiple central banks raising interest rates to combat high inflation rates.
Oil is under pressure from the triple blow of China’s economic weakness, the tightening of US monetary policy, and the Biden administration’s SPR intervention.
Biden cited the possibility of additional release from the US Strategic Petroleum Reserve next month, in response to a decision last week by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia. The target amount is 2 million barrels per day.
Brent and WTI reported their biggest percentage gains since March following the announcement of the decline.
OPEC+ cuts, which thwart the European Union’s embargo on Russian oil, will further tighten supply in an already tight market. EU sanctions on Russia’s crude oil and petroleum products will come into effect in December and February, respectively.
However, there is still a lot of uncertainty in the market, including how Russia’s oil supply is developing due to the EU oil ban and the G-7 price cap, and the worsening macro picture of the demand outlook.
Analysts at banks and brokerages have raised their crude oil price forecasts and Brent is expected to rise above $100 a barrel in the coming months.
Despite the promised production cuts, Saudi Arabian state oil company Saudi Aramco has told at least five North Asian customers that it will receive the full contract volume of crude oil in November, according to sources familiar with the matter.
This suggests little change in physical oil supply to Asian buyers of crude oil, at least from Saudi Arabia, which will assume the bulk of the cuts announced as OPEC’s largest producer.
