Oil prices fell on Monday as concerns over fuel demand in the US and China, the leading global oil consumers, offset the upside sentiment about tighter supply from the OPEC+ cut and the resumption of US reserve purchases.
Brent crude futures fell 62 cents, or 0.84%, at 0348 GMT to $73.55 a barrel, West Texas Intermediate (WTI)was down 56 cents, or 0.8%, to $69.48 a barrel.
Last week, both benchmarks fell for the fourth week in a row, the longest streak of weekly declines since September 2022 on concerns that the US could enter a recession in the first two weeks of June amid the risk of a historic default.
Investors viewed the U.S. dollar as a safe haven. The trend is strengthening the currency and making dollar-denominated commodities more expensive for holders of other currencies.
Oil prices are under pressure from a sluggish demand outlook as China’s economic reopening process behaves painfully. The US banking debacle also caused tensions in the market.
Investors will be watching China’s economic data on industrial production, fixed asset investment, and retail sales next week for signs of recovery in oil demand.
Market sentiment for crude oil will remain mild at best, with concerns that the US is facing a growth slowdown at the time of erratic reopening and a debt ceiling in China, and a rally in the US dollar.
Still, the global crude oil supply could shrink in the second half as the OPEC+ group, the Organization of the Petroleum Exporting Countries, and their allies, including Russia, make additional production cuts that reduce the crude oil supply.
But oil minister Hayan Abdel-Ghani said that Iraq does not expect OPEC+ to cut oil production further at its next meeting in June.
Energy Secretary Jennifer Granholm said on Thursday that the United States could begin oil buybacks for the Strategic Petroleum Reserve (SPR) after completing a congress-mandated sale in June.
This announcement was followed by the weekly report of the energy services company Baker Hughes Co. U.S. oil and gas rig counts fell to their lowest level in nearly a year this week, as it reported its biggest drop in a week since February 2016. U.S. oil rigs fell two this week to 586, their lowest since June 2022, while gas rigs fell by 16 to 141 last year’s low.
Meanwhile, officials who are directly aware of the talks said that the leaders of the Group of Seven (G7) countries will be able to announce new measures aimed at avoiding sanctions involving third countries at their meetings on 19-21 May.
India and China, the world’s No. 3 and 1 crude importers respectively, have been the main buyers of Russian crude since the European Union embargo began in December.
Tightening sanctions against Russia is likely to undermine Russia’s future energy production and curb trade that supports the Russian military.