Oil edged lower as the letdown of weaker-than-expected Chinese demand outweighed stronger US consumer data and a more bullish outlook from the IEA.
Oil settled just below $71 a barrel, with traders shying away from risk assets amid increased concerns the US may default on its debts. Adding to headwinds, data from China showed industrial output and retail sales growing at a slower pace, signaling that the oil-consuming behemoth might be losing momentum. That comes even as the nation’s refineries continue processing near-record levels of crude.
“In China, where there were great expectations for demand growth, there is a lot of failure,” Ed Morse, global head of commodity research at Citigroup Inc., said in a Bloomberg Television interview on Monday. The impulse for lending both to businesses and consumers is decreasing, he added.
Bright spots in the market limited the drop. US retail sales figures released Tuesday suggested spending is holding up in the face of inflation and high borrowing costs. The International Energy Agency also raised its global demand outlook by 200,000 barrels and projected the market will shift to a supply deficit in the months ahead.
Oil has declined 12% since this year as China’s recovery disappointed some bulls and the potential for a US recession weighs on the global demand outlook. Meanwhile, the US government has solicited bids for as much as 3 million barrels of sour crude for its Strategic Petroleum Reserve, with deliveries planned for August. The agency released more than 200 million barrels last year, in part to curb higher prices.
- WTI for June delivery fell 25 cents to settle at $70.86 a barrel in New York.
- Brent for July settlement fell 32 cents to settle at $74.91 a barrel.
Global demand may reach a record 102 million barrels a day this year as China’s usage hits an all-time high, the IEA said. The agency also noted that Russia’s oil exports in April rose to the highest level since the country invaded Ukraine, and that its pledged crude output cuts have yet to be implemented. Meanwhile, the EU’s top foreign-policy representative said in an interview with the Financial Times that member states must take measures against Russian oil flowing into Europe via India.
-With assistance from Sri Taylor.
Published at Tue, 16 May 2023 12:51:55 -0700