Futures Movers: Oil prices edge lower on China demand worries

Posted By: EN Todayon: August 22, 2023In: General Energy News, Oil & Gas News

Oil futures edged lower early Tuesday, unable to shake worries about China’s economic outlook and the implications for demand from the world’s second-largest crude consumer.

Price action

West Texas Intermediate crude for September delivery
CL.1,
-0.36%

CLU23,
-0.36%
fell 18 cents, or 0.2%, to $80.54 a barrel on the New York Mercantile Exchange.
October Brent crude
BRN00,
-0.50%

BRNV23,
-0.50%,
the global benchmark, was off 36 cents, or 0.4%, at $84.10 a barrel on ICE Futures Europe.

Market drivers

Oil futures have rallied this summer on expectations for the market to move into deficit in the second half, aided by Saudi Arabia’s 1 million barrel-a-day production cut, which took effect in July and is set to run through the of September. Russia has also throttled back exports.

But worries over China’s economy after a continued run of lackluster data have been amplified by problems in the country’s property sector, dimming the outlook for demand. Brent and WTI both fell more than 2% last week, ending a run of seven straight weekly gains.

A sharp drop in the Russian ruble, meanwhile, could impinge Russia’s ability to continue scaling back crude exports, Peter Cardillo, chief market economist at Spartan Capital, said in a Tuesday note.

“The Russian situation, in our opinion, may force Russia to up its production causing a rift between OPEC+, leading to a breakdown of unity among OPEC+ producers,” he said.

The American Petroleum Institute, an industry trade group, is expected to report weekly inventory data after Tuesday’s close. Official figures from the Energy Information Administration are due Wednesday morning.

Analysts surveyed by S&P Global Commodity Insight, on average, expect crude inventories to show a drop of 4.24 million barrels last week as refinery runs increase and exports accelerate, while gasoline stocks are expected to fall by 1.15 million barrels. Distillate stocks were expected to show little change.