Oil futures are experiencing a slight decline as concerns about China’s economic outlook and its impact on demand weigh on the market. Despite expectations of a deficit in the second half of the year and production cuts by Saudi Arabia and Russia, worries surrounding China’s lackluster data and its struggling property sector have dimmed the outlook for oil consumption.
Price Action:
- West Texas Intermediate (WTI) crude for September delivery fell 0.2% to $80.54 a barrel on the New York Mercantile Exchange.
- The global benchmark, October Brent crude, declined 0.4% to $84.10 a barrel on ICE Futures Europe.
Market Drivers:
The recent rally in oil futures, driven by expectations of a market deficit, has been supported by Saudi Arabia’s production cut and Russia’s reduced exports. However, concerns about China’s economy have intensified due to ongoing weak data and issues in the country’s property sector. As a result, WTI and Brent both experienced a more than 2% decline last week, ending a seven-week streak of consecutive gains.
Moreover, the sharp drop in the Russian ruble may impact Russia’s ability to sustain its reduced crude exports. This could potentially lead to a rift between OPEC+ countries, causing a breakdown of unity among producers.
Inventory Data:
The American Petroleum Institute is expected to release its weekly inventory data after Tuesday’s market close, with official figures from the Energy Information Administration due on Wednesday morning. Analysts predict a drop of 4.24 million barrels in crude inventories as refinery runs increase and exports accelerate. Gasoline stocks are also anticipated to decrease by 1.15 million barrels, while little change is expected in distillate stocks.
These developments highlight the challenges faced by oil futures amidst the uncertain economic conditions in China, which continue to influence global demand for crude oil.