Oil prices fell more than 1% on Monday as concerns over rising interest rates, the global economy, and the fuel demand outlook outweighed support from tighter supply expectations amid OPEC+ supply cuts.
Brent crude slipped 91 cents, or 1.11%, at 0627 GMT to $80.75 a barrel, while West Texas Intermediate crude (WTI) was at $76.96 a barrel, also down 91 cents, or 1.17% lower.
Both contracts fell more than 5% last week, their first weekly declines in five weeks, as US gasoline demand hinted at falling from a year ago, fueling recession concerns in the world’s largest oil consumer.
Weak US economic data and disappointing corporate earnings from the tech sector are fueling growth concerns and risk aversion among investors. Stabilizing the US dollar and rising bond yields are putting pressure on commodity markets.
All central banks, from the USA to the UK and Europe, are expected to raise interest rates at their meeting in the first week of May to combat stubbornly rising inflation.
China’s tumultuous economic recovery from COVID-19 also overshadowed the oil demand outlook, although Chinese customs data showed on Friday that the world’s largest importer of crude oil imported record volumes in March. China’s imports from its leading suppliers, Russia and Saudi Arabia, exceeded 2 million barrels per day.
Still, Asian refinery margins were weakened by record outputs from leading refineries in China and India, curbing the region’s appetite for June to load supplies from the Middle East.
However, analysts and traders remain optimistic that the recovery in fuel demand in China towards the second half of 2023 and the additional supply cuts planned by OPEC+ from May could squeeze the markets.
The production cuts planned by the OPEC+ alliance and the strong demand outlook from China may provide a boost to prices in the coming days.
Energy services company Baker Hughes Co said that U.S. energy companies added oil and gas rigs for the first time in four weeks last week.
