SINGAPORE (Reuters) – Oil prices fell on Monday as worries about fuel demand in the world’s two largest oil consumers, the United States and China, offset bullish sentiment about tightening supplies from OPEC+ cuts and a resumption of U.S. purchases of reserves.
Brent crude futures fell 26 cents, or 0.35%, to $73.91 a barrel by 0638 GMT, while US West Texas Intermediate crude recorded $69.34 a barrel, down 20 cents, or 0.29%.
Last week, both benchmarks fell for the fourth straight week, the longest streak of weekly declines since September 2022, on fears that the US could enter a recession due to a “high risk” of a historic default during the first two weeks of June.
Investors have sought safe havens such as the US dollar, which has strengthened the currency and made dollar-denominated commodities more expensive for holders of other currencies.
“Oil prices remain under pressure due to the stagnant demand outlook as the reopening of the Chinese economy appears to be tortuous,” said Tina Ting, an analyst at CMC Markets, adding that the defeat of US banks has also caused market jitters.
It said investors would be looking for a slew of economic data in China on industrial production, fixed asset investment and retail sales next week for signs of improving oil demand.
“With an uneven reopening in China and concerns that the US is facing slowing growth at a time when the X date for the debt ceiling is fast approaching, fueled by a rally in the US dollar, market sentiment is fueled by crude oil,” said Tony Sycamore, an analyst at IG.
However, global crude supplies may shrink in the second half as the Organization of the Petroleum Exporting Countries (OPEC+) and its allies, including Russia, make additional production cuts that reduce the availability of high-sulfur crude.
The group announced in April that some members would cut production again by about 1.16 million bpd, bringing the total size of the cuts to 3.66 million bpd, according to Reuters calculations.
But Iraqi Oil Minister Hayan Abdul Ghani said Iraq did not expect OPEC+ to make further oil production cuts at its next meeting in June.
Energy Secretary Jennifer Granholm told lawmakers on Thursday that the United States could begin buying back oil for the Strategic Petroleum Reserve (SPR) after completing a sale approved by Congress in June.
This announcement was followed by a weekly report issued by the energy services company Baker Hughes Co (BKR.O) which showed that the number of US oil rigs decreased by two to 586 this week, the lowest level since June 2022, while the number of gas rigs decreased by two. 16 to 141.
Meanwhile, leaders of the Group of Seven (G7) nations may announce new measures at their May 19-21 meetings aimed at evading sanctions involving third countries, officials with direct knowledge of the discussions said.
People said that tougher sanctions would also seek to undermine Russia’s energy production in the future and curb trade that supports the Russian military.
India and China, the world’s No. 3 and No. 1 largest importers of crude oil, respectively, have been the main buyers of Russian crude since the EU embargo began in December.
(Reporting by Florence Tan) Editing by Muralikumar Anantharaman
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