Oil prices have retreated from several-month highs seen in the previous session as US crude stockpiles rise and stagnant economic data from China raises concerns about global fuel demand.
Brent crude fell 9 cents, or 0.1%, to $87.46 a barrel at 0408 GMTD After settling at its highest level since January 27 on Thursday.
West Texas Intermediate crude (WTI) fell 6 cents, or 0.1%, to $84.34 after settling at its highest level since November 2022.
U.S. crude inventories rose 5.9 million barrels last week to 445.6 million barrels, compared to analysts’ expectations for an increase of 0.6 million barrels, according to U.S. Energy Information Administration (EIA) data on Wednesday.
U.S. crude exports fell 2.9 million barrels per day last week to 2.36 million barrels per day (bpd), the sharpest drop on record, data show. However, the market is expected to increase crude oil exports due to US crude oil futures and Brent spread.
Suppressing market sentiment, the consumer sector in China fell into deflation and ex-factory prices extended their decline in July as the world’s second-largest economy struggled to stimulate demand.
China’s 5% growth forecast, which seemed too modest at the beginning of 2023, started to look very optimistic due to China’s inability to sustain its post-COVID economic recovery.
The market awaits the July Consumer Price Index (CPI) from the US on Thursday, which will show the Fed’s future monetary policy. Market watchers expect the CPI to accelerate slightly year-on-year, with consumer prices increasing by 0.2% on a monthly basis, at the same rate as in June.
Meanwhile, Chevron and Woodside Energy Group said Thursday they are in talks with unions to avoid the threat of strikes at gas utilities that together supply about 10% of the global liquefied natural gas (LNG) market.
Concerns over LNG supply pushed European gas prices to a nearly 2-month high on Wednesday, bolstering the outlook for diesel demand as an alternative fuel.
However, as the tensions between Russia and Ukraine in the Black Sea region threatened the shipment of Russian oil, oil prices continued to be supported by concerns about supply shortages.
The world’s largest exporter, Saudi Arabia, last week extended its voluntary production cut of 1 million bpd until the end of September, adding that it could be further extended or deepened. Russia also said it would cut oil exports by 300,000 barrels per day in September.
Oil prices have been resistant to the weak economic outlook in China in recent weeks. Market participants continue to recover from their previous downward position, taking advantage of Saudi Arabia’s tight supply conditions and Russia’s production cuts.