Oil prices fell in Asian trade on Thursday as fears of slowing demand recovery in China, the world’s largest importer of crude oil, offset tighter supply expectations for top exporters Saudi Arabia and Russia to cut production.
Brent crude futures fell 25 cents, or 0.3%, to $76.40 a barrel at 0400 GMT, after rising 0.5% the previous day. West Texas Intermediate crude (WTI) fell 7 cents, or 0.1%, to $71.72 a barrel after closing 2.9% higher in post-holiday trade on Wednesday
Despite calls for supply cuts in recent months, oil prices remained locked in a largely volatile pattern as continued caution on the demand outlook weighed on the upside trend. In the near term, moves above the $80.00 level are needed to entice the bulls.
The volatility regarding the slow economic recovery in China thereafter the lifted pandemic restrictions along with demand concerns, global macroeconomic headwinds, and central bank interest rate hikes are not so encouraging.
China’s service activity expanded at its slowest pace in five months in June, weighing on the demand outlook, and weakening demand weighed on the post-pandemic recovery momentum. Upward momentum seems limited due to uncertainty about China’s economic growth and the pace of recovery in fuel demand.
By the way, we can say that a larger-than-expected drop in US crude oil inventories, along with Saudi Arabia’s announcement of supply cuts on Monday, somewhat bolstered the sentiment.
U.S. crude inventories fell by about 4.4 million barrels in the week ended June 30, while gasoline and distillate inventories rose, according to market sources citing figures from the American Petroleum Institute (API). Analysts had expected a lower, like 1 million-barrel drop in crude oil inventories.
Government data on US inventories will be released on Thursday at 1500 GMT.
Saudi energy minister Prince Abdulaziz bin Salman said on Wednesday that Russia-Saudi oil cooperation is still going strong as part of the OPEC+ alliance, which will do “everything necessary” to support the market.
