Oil dips as China demand fears offset tighter supply outlook

Singapore, July 6 (BNA): Oil prices fell in Asian trading today, Thursday, amid fears of a slowdown in demand recovery in China, the largest importer of crude in the world, which offset the possibility of a contraction in supply, with major exporters Saudi Arabia and Russia cutting production.

Brent crude futures were down 21 cents, or 0.3%, at $76.44 a barrel at 0650 GMT, after settling 0.5% higher the day before, Reuters reported.

US West Texas Intermediate crude fell 4 cents to $71.75 a barrel, after closing up 2.9% in after-holiday trading on Wednesday, catching up to gains in Brent earlier in the week.

“Despite calls for supply cuts over the past months, oil prices have remained largely confined within a range pattern as continued caution around the demand outlook continues to cap the upside,” said Yeap Jun Rong, market strategist at IG.

“In the near term, a move above the key $80.00 level may be needed to provide some conviction to the bulls,” Yip added.

Demand concerns persisted over China’s slow economic recovery after the lifting of epidemic restrictions, as well as global macroeconomic headwinds and interest rate hikes by central banks.

A survey of the private sector on Wednesday showed that services activity in China expanded at the slowest pace in five months in June, weighing on the demand outlook, as weak demand weighed on the momentum of the post-pandemic recovery.

“Upside seems to be limited due to uncertainty about the pace of Chinese economic growth and demand recovery,” said Tatsufumi Okoshi, chief economist at Nomura Securities, who predicted WTI would remain in the $65 to $75 range in the future.

But Okoshi said Saudi Arabia’s announcement of a supply curb on Monday and expectations of a possible additional cut, along with a larger-than-expected drop in US crude inventories, provided some support to sentiment.

US crude inventories fell by about 4.4 million barrels in the week ending June 30, while gasoline and distillate inventories rose, according to market sources citing figures from the American Petroleum Institute. Analysts had expected a decrease in crude stocks by about one million barrels in a Reuters poll.

Government data on US inventories is due at 11:00 AM ET on Thursday.

MI