Oil Slides over Weak Economic Outlook in China
The global price of crude oil declined on Monday over an expectation that aggregate demand will weaken on the back of slowing economic activity in China and a weak economic outlook.
The decline in market prices of oil grades occurred despite two million production quota cuts by the Organisation of Petroleum Exporting Countries and allies. However, in a note, Fitch Ratings said the production cut by the oil group is insignificant to the market supply.
On Monday, the international benchmark Brent crude traded at $97.38 per barrel, representing a 0.55% drop from the closing price of $97.92 a barrel in the previous trading session.
American benchmark West Texas Intermediate (WTI), trading at $92.14 per barrel at the same time, decreased 0.53% after the previous session closed at $92.64 a barrel. READ: Oil Prices Rise 7% on China, U.S Economic Recovery
The prices started the week on a negative note due to the reports on slowing economic activity in China, the world’s biggest crude oil importer.
The slowdown in China fueled demand worries in addition to the current recession fears as central banks administer interest rate hikes to mitigate inflation worries.
The expectations for the US to offer additional releases from its Strategic Petroleum Reserves in response to OPEC+ production cut also pressured the prices.
The group of Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed last week to cut production by 2 million barrels per day starting in November.
Following the group’s meeting, US officials said that US President Joe Biden ‘is disappointed’ by OPEC+’s decision and announced the delivery of another 10 million barrels from the strategic petroleum reserve to the market next month.
Concerns grew further as EU countries on Wednesday reached an agreement on the eighth sanctions package against Russia, which include a prohibition of transporting oil to non-EU countries above a certain price.
Analysts expect the prices to trade over $100 a barrel in the coming months, although market uncertainties persist.
# Oil Slides over Weak Economic Outlook in China#