June 19: Oil prices fell on Monday as questions over China’s economy outweighed OPEC+ output cuts and the seventh straight drop in the number of oil and gas rigs operating in the United States.
Brent crude settled down 48 cents, or 0.6%, to $76.13 a barrel while U.S. West Texas Intermediate (WTI) crude was down 49 cents, or 0.7%, to $71.29 at 1935 GMT. Trading volumes were thin due to a U.S. holiday.
Both contracts ended last week with gains of more than 2%.
A number of large banks have cut their forecasts for China’s 2023 growth in gross domestic product after May data last week showed the post-COVID recovery in the world’s second-largest economy was faltering.
China is widely expected to cut its benchmark loan rates on Tuesday after a similar reduction in medium-term policy loans last week to shore up a shaky economic recovery.
The oil market is watching for further signs of whether the global economy will pick up, said Jorge Leon, Rystad Energy’s senior vice president.
“Much will depend on China’s economic performance in the second half of this year and the effectiveness of the country’s recently announced stimulus measures, and on the ability of the U.S. and Europe to avoid an economic slowdown amid interest rates hikes,” Leon wrote in a research note.
However, China’s refinery throughput rose in May to its second-highest total on record, helping to boost last week’s gains, and U.S. energy firms cut the number of working oil and natural gas rigs for a seventh week in a row for the first time since July 2020.
Rising Iranian oil exports also weighed on prices. Iran’s crude exports and oil output have hit record highs in 2023 despite U.S. sanctions, according to consultants, shipping data and a source close to the matter, adding to global supply when other producers are limiting output.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia this month agreed on a new oil output deal and the group’s biggest producer, Saudi Arabia, also pledged to make a deep cut to its output in July.
“Sentiment-wise in the crude oil market, traders are fairly bearish,” said Daniel Ghali, a commodity strategist at TD Bank. “But from a broader perspective, the analyst community is still looking for pretty significant deficits in coming months.”
