Oil Prices Fall
In a rather intriguing twist, the global oil market witnessed a decline in oil prices fall on the present day. This reversal follows the gains accumulated in the previous week. Interestingly, despite the positive influence of OPEC+ output cuts and the consecutive reduction in the number of operational oil and gas rigs in the United States, concerns regarding China’s economy took precedence. The pricing dynamics were clearly affected, with Brent crude experiencing a loss of 68 cents, now trading at $75.93 per barrel around 0042 GMT. Similarly, US West Texas Intermediate (WTI) crude witnessed a decline of 59 cents, settling at $71.19. The previous week, however, showcased an upward trend, as Brent recorded a notable gain of 2.4%, while WTI climbed by 2.3%.
Several prominent banks have revised their growth forecasts for China’s gross domestic product (GDP) in 2023 after the release of May data last week, which indicated a stumbling post-COVID recovery in the world’s second-largest economy.
Sources have informed Reuters that China intends to introduce further stimulus measures to support its decelerating economy throughout this year. However, concerns surrounding debt and capital flight will likely result in these measures being targeted primarily at bolstering weak demand in the consumer and private sectors.
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Nonetheless, China’s refinery throughput experienced a rise in May, reaching its second-highest recorded total. This development contributed to the gains observed last week. Concurrently, US energy firms reduced the number of operational oil and natural gas rigs for the seventh consecutive week, a trend not seen since July 2020.
The count of oil and gas rigs serves as an early indication of future output, and it dropped by 8 to reach 687 in the week ending June 16, marking its lowest level since April 2022.
Furthermore, the voluntary output cuts implemented by the Organization of the Petroleum Exporting Countries (OPEC) and its allies in May, along with an additional cut by Saudi Arabia in July, are providing further support to oil prices.
ANZ Research highlighted in a note that there were indications of robust demand during the US driving season. Notably, US gasoline demand surged to 9.24 million barrels per day last week, the highest level recorded since December 2021.