Oil prices experienced a decline of more than 1% on Monday, driven by concerns surrounding weaker-than-expected economic growth in China, the world’s second-largest oil consumer. Furthermore, the resumption of production at certain Libyan fields contributed to the downward pressure on prices.
China’s gross domestic product (GDP) grew by 6.3% year-on-year during the second quarter, falling short of analysts’ predictions of 7.3%. This disappointing performance raised worries about the Chinese economy, given weakening demand both domestically and internationally.
Warren Patterson, Head of Commodities Research at ING, acknowledged that the GDP figures did little to alleviate concerns about China’s economic situation.
During the day, Brent crude experienced a decline of 97 cents, or 1.2%, settling at $78.90 per barrel by 1330 GMT. Similarly, U.S. West Texas Intermediate crude dropped by 83 cents, or 1.1%, reaching $74.59 per barrel. This marked the second consecutive day of losses for both oil contracts.
John Evans, an oil broker at PVM, noted that the release of Chinese data had previously been met with optimism, particularly among bullish investors. However, the current economic climate in Asia, which serves as a driving force for global markets, is now favoring bearish sentiment.
Initially, oil prices briefly rose following a Reuters news alert regarding Saudi Arabia extending a voluntary output cut. However, the alert was subsequently retracted as it duplicated information published on June 4.
Both Brent crude and U.S. West Texas Intermediate had shown positive momentum in the past three weeks, reaching their highest levels since April. This was primarily attributed to output restrictions by OPEC+ and unplanned production disruptions in Libya and Nigeria.
The resumption of production at two out of three Libyan fields that had been shut down last week added further pressure on oil prices. The shutdown had resulted from a protest against the abduction of a former finance minister.
Additionally, signs of tighter supplies emerged as Russian oil exports from western ports are expected to decrease by 100,000-200,000 barrels per day (bpd) next month. This reduction indicates that Moscow is following through on its commitment to implement supply cuts in coordination with Saudi Arabia, according to two sources cited on Friday.
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