oil prices

Oil prices remained within a narrow range on Friday due to weak economic data from China, indicating ongoing challenges for the world’s largest oil importer. However, Brent crude was on track to register its first positive month in 2023.

Chinese PMIs indicate economic recovery doubts in June
Government data released on Friday revealed that China’s manufacturing sector, a crucial driver of the country’s economy, contracted in June. Additionally, the growth of the service sector fell short of expectations. These readings suggest that China’s post-COVID economic recovery is showing limited signs of improvement, despite repeated stimulus efforts from Beijing.

The discouraging economic data from China has dampened hopes of a robust recovery in the country leading to record-high global oil demand this year.

Nevertheless, the weak data raises the possibility of additional stimulus measures from Beijing, as the government grapples with the task of revitalizing slowing economic growth. Throughout the year, the People’s Bank of China has consistently injected cash into the economy to spur growth, and recently, it lowered interest rates for the first time in ten months.

Brent crude futures edged up 0.1% to reach $74.60 per barrel, while West Texas Intermediate crude futures remained steady at $69.90 per barrel as of 22:07 ET (02:07 GMT). Both contracts were on track to record gains between 2% and 3% for June, with Brent poised to achieve its first positive month this year.

Oil markets influenced by Fed concerns; PCE inflation data awaited
Despite the June gains for Brent and WTI, both remained lower for the year, reflecting uncertainty surrounding crude demand in the second half of the year.

Oil markets experienced significant fluctuations as optimism about tightening supplies and U.S. economic strength was counteracted by hawkish signals from the Federal Reserve and other major central banks.

Notably, U.S. inventories saw a larger-than-anticipated decline during the week ending June 23, providing some support to oil prices this week.

However, a significant upward revision in first-quarter U.S. economic growth data did little to boost oil markets, as traders worried that the resilience of the economy would allow the Federal Reserve to continue raising interest rates.

Attention now turns to the personal consumption expenditures price index data, which is the Fed’s preferred inflation gauge, to gain insights into the bank’s plans for tightening policy throughout the year.

Concerns about rising interest rates eroding economic growth and, consequently, oil demand have largely offset any optimism stemming from tightening supplies this year.


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