ANKARA
Oil prices declined on Monday as data reflecting the struggling economy of the world’s largest oil importer, China, overshadowed Saudi Arabia’s planned production cuts of 1 million barrels per day (bpd) in July.
International benchmark Brent crude traded at $76.11 per barrel at 10.37 a.m. local time (0737 GMT), a 0.65% loss from the closing price of $76.61 a barrel in the previous trading session on Friday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $71.50 per barrel, down 0.59% from the previous session’s close of $71.93 per barrel.
Oil prices fell as data indicated a slowdown in China’s industrial output and the country’s decision to increase stimulus to help its weakening economy.
According to China’s National Bureau of Statistics (NBS), industrial output fell short of expectations with a growth rate of 3.5% in May from a year earlier, slowing from the 5.6% expansion in April.
Offsetting demand fears, oil refinery production in China reached record-high levels with an increase of 15.4% in May compared to the same month last year.
Demand fears persist
However, rising recessionary fears in Western economies as central banks raise interest rates are fueling bearish market sentiment.
Last week, US Federal Reserve Governor Christopher Waller said at an economics conference in Oslo, Norway, that the US Federal Reserve (Fed) is keeping watch over troubles in the US banking sector to gauge the need for further rate hikes.
In its latest meeting that concluded on Wednesday, the Fed kept the federal funds rate constant, the first time it has not been raised since January 2022.
Despite other interest rate hikes by other central banks, the persistently high and unconventional inflation amid a worsening macroeconomic outlook is pushing more companies to speed up layoffs in order to reduce costs, adding to fears of a recession.
Since the beginning of the year, the trend of workforce reduction has gained traction, affecting at least 140,000 people. These cutbacks have had an especially negative impact on the telecommunications, information technology, automobile, and retail sectors.
Contrary to expectations, the rise in commercial crude oil inventories in the US, the world’s largest oil-consuming country, reflects demand weakness.
US commercial crude oil inventories increased by 7.9 million barrels during the week ending June 9, according to data released by the Energy Information Administration late Wednesday. The rise in inventory was contradictory to the American Petroleum Institute’s expectation of a fall of 1.3 million barrels.
Demand for gasoline also showed a decline last week ahead of peak travel months, as inventories grew by around 2.1 million barrels to 220.9 million barrels.
Investors are now awaiting the upcoming output cuts in Saudi Arabia in July. The swing producer of the OPEC group announced during the group’s recent meeting its decision to further cut oil output by 1 million bpd in July in addition to its 500,000 bpd pledge a month earlier. The group said the Saudi cut may be extended if needed.
