Oil edged lower as disappointment from weaker-than-expected Chinese demand outweighed stronger US consumer data and a more upbeat outlook from the IEA.
Oil settled just below $71 a barrel, with traders shunning risk assets amid growing concerns that the US could default on its debt. Adding to the headwinds, data from China showed industrial production and retail sales grew at a slower pace, indicating the oil-consuming behemoth may be losing momentum. This comes even as the country’s refineries continue to process near-record levels of crude.
“In China, where there were high expectations for demand growth, there are a lot of failures,” Ed Morse, global head of commodities research at Citigroup Inc., said in a Bloomberg Television interview on Monday. The drive to lend to both businesses and consumers is waning, he added.
Bright spots in the market limited the decline. U.S. retail sales figures released on Tuesday suggest spending is holding up in the face of inflation and high borrowing costs. The International Energy Agency also raised its outlook for global demand by 200,000 barrels and predicted the market will shift to a supply deficit in the coming months.
Oil has fallen 12% so far this year as China’s recovery disappointed some bulls and the potential for a U.S. recession weighed on the outlook for global demand. Meanwhile, the US government has solicited bids for up to 3 million barrels of sour crude for its Strategic Petroleum Reserve, with deliveries scheduled for August. The agency released more than 200 million barrels last year, in part to curb higher prices.
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 hit a record 102 million barrels a day this year as China’s use hits a record 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 promised crude production cuts have yet to be implemented. Meanwhile, the EU’s top foreign policy official said in an interview with the Financial Times that member states must take action against Russian oil flowing to Europe via India.
-With the help of Sri Taylor.
