Oil prices ease on fears of weaker demand

Singapore, July 3 (BNA): Oil prices fell on Monday as fears of a slowing global economy and the prospect of further interest rate hikes by the US Federal Reserve weighed on prices, offsetting expectations of supply shortages amid OPEC+ cuts.

Brent crude futures were last down 0.4 percent, or 27 cents, at $75.14 a barrel by 0630 GMT, after settling down 0.8 percent on Friday. US West Texas Intermediate crude recorded $70.36 a barrel, down 0.4%, or 28 cents, after closing up 1.1% in the previous session.

Brent crude fell for the fourth consecutive quarter by the end of June, while WTI posted a second quarterly decline as the world’s two largest economies, the United States and China, lost pace in the second quarter.

Fears of a further slowdown hurting fuel demand grew after data on Friday showed that US inflation was still above the central bank’s 2% target and raised expectations of another rate hike.

“The hawkish comments on interest rates continue to raise concerns about the demand outlook affecting prices,” National Australia Bank analysts said in a note.

Higher interest rates can strengthen the US currency, making commodities more expensive for holders of other currencies, and also reduce demand for oil.

Economists and analysts cut their forecast for the Brent crude price to average $83.03 a barrel in 2023, in a Reuters Oil poll in June.

Factory activity growth in China, the world’s largest crude importer, also slowed in June as sentiment and employment slowed on the back of sluggish market conditions, according to the Caixin/S&P Global Private Sector Survey.

However, some analysts expect tighter supplies and push prices higher in the second half after Saudi Arabia, the world’s largest oil exporter, pledged to cut production by an additional 1 million barrels per day in July, while the United States gradually replenishes its strategic petroleum reserves.

Multiple production cuts by OPEC+ have kept oil prices above key levels, said Tina Ting, analyst at CMC Markets, which could see additional production cuts by the cartel to keep the crude oil market stable.

However, the latest Reuters survey showed that OPEC oil production fell only slightly in June as increases in Iraq and Nigeria offset the impact of cuts by others.

Investors are looking forward to a conference later this week hosted by the Organization of the Petroleum Exporting Countries (OPEC) on supply indicators.

Baker Hughes data showed that US oil rigs decreased by one to 545 last week, the lowest level since April 2022, while gas rigs fell six to 124, the lowest level since February 2022.

The US Energy Information Administration said on Friday that US crude production fell in April to 12.615 million barrels per day, the lowest level since February.

MI