Crude oil prices experienced a decline on Monday, relinquishing some of the robust gains from the previous week as China’s disappointing growth data raised concerns regarding the global economic rebound, especially in the world’s leading oil importer.
By 09:15 ET (13:15 GMT), U.S. crude futures were trading 1% lower at $74.56 per barrel, while the Brent contract also dropped 1% to $79.08.
Last week witnessed the crude market reaching its highest levels since April, supported by output restrictions implemented by OPEC+ and unexpected disruptions in Libya and Nigeria.
Underwhelming Chinese Growth Figures
However, the positive sentiment waned early on Monday due to the release of lackluster gross domestic product (GDP) data from China, the second-largest oil consumer globally.
China’s GDP for the second quarter grew by a mere 0.8% compared to the previous quarter, marking a significant slowdown from the 2.2% growth recorded earlier.
Moreover, on an annual basis, GDP expanded by 6.3% during the second quarter. Yet, this growth was primarily attributed to a lower basis of comparison with the COVID-affected period last year, falling short of the expected 7.3% growth.
Analysts at ING commented, “The data will provide little reassurance regarding the Chinese economy.”
Resumption of Libyan Oil Field Production
Adding to the cautious sentiment on Monday was the news that most major oil fields in Libya had resumed production over the weekend. This came after production was halted due to a protest against the abduction of a former finance minister.
“Oil prices faced additional pressure as the US dollar made a slight recovery, while concerns over supply eased with the resumption of operations at the Sharara and El Feel oil fields in Libya after a brief shutdown last week,” ING stated.
Anticipated Reduction in Crude Supply in the Second Half
Nonetheless, there is positive news ahead, as crude supply is expected to decrease significantly in the second half of 2023 due to production cuts by Saudi Arabia and Russia, which will gradually impact the market.
Moreover, uncertainty remains regarding potential Western responses to Russia’s suspension of its participation in the Black Sea grain export deal. The deal, established in July last year to facilitate safe export of Ukrainian grain affected by the Russia-Ukraine conflict, was set to expire on Monday after several extensions.
Speculative Optimism Fuels ICE Brent Contract
The optimism surrounding future oil prices has prompted speculators to increase their net long positions in the ICE Brent contract during the latest reporting week. This surge positions speculators at their highest net long position since April.
“However, it is likely that the current speculative long position is somewhat larger, considering that this data does not account for the post-US CPI rally,” ING added.
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