Oil prices fall on weak China economic data and Libya output resumption

Production at two key oilfields in the North African country restarted after being shut due to protests

Huangpu district in Shanghai. China's economy grew by an annual 6.3 per cent in the second quarter. AFP

Oil prices fell on Monday as weak economic data from China stoked concerns about crude demand and as Libya resumed production at the weekend.

Brent, the benchmark for two thirds of the world’s oil, was trading 1.97 per cent lower at $78.27 a barrel at 1.51pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was down 2.06 per cent at $73.87 a barrel.

Futures jumped more than 2 per cent to $80.43 a barrel at 1.09pm UAE time on an erroneous Reuters news alert that said Saudi Arabia was extending its voluntary output cut of a million barrels per day until December 2024.

Prices reversed course after Reuters issued a correction and withdrew the alert.

Gross domestic product in the world's second-largest economy expanded by an annual 6.3 per cent from April to June, after growing 4.5 per cent in the previous three months as the country removed Covid-19 restrictions and reopened, according to the latest data released on Monday by the National Bureau of Statistics.

However, the pace of growth in the second quarter missed the 7.1 per cent estimate of economists polled by Bloomberg and the 7.3 per cent forecast of those surveyed by Reuters.

Quarterly GDP growth was only 0.8 per cent between April and June, compared with the previous three months.

“Recent economic data out of China [has] pointed to declines in exports, weak retail sales and continued troubles in the Chinese property market, which are all factors likely to have weighed on activity in the second quarter,” Emirates NBD analysts said in a research note.

China’s economy, which rebounded after the lifting of Covid-19 restrictions at the start of the year, lost momentum in May, posting weaker retail sales and manufacturing output while registering a slowdown in the property sector.

The International Energy Agency expects global oil demand to increase by 2.2 million barrels per day this year, with China making up 70 per cent of the gains.

Last week, Opec raised its oil demand growth forecast for 2023 based on higher demand in the Asian country.

Global oil demand is now projected to increase by 2.4 million bpd this year, up from a previous estimate of 2.3 million bpd, the group said in its monthly oil market report.

“Demand is revised up on the back of strong year-on-year oil demand growth in both April and May in China. This was further supported by some improvements in oil requirements in the US and Latin America,” Opec said.

Meanwhile, production at two key Libyan oilfields resumed at the weekend after being shut due to protests, according to media reports.

Operations at the Sharara, El Feel and 108 oilfields were halted last Thursday after tribal leaders protested against the apparent arrest of a former finance minister.

The Sharara field, one of Libya’s largest production areas with a capacity of 300,000 bpd, partially resumed production on Saturday, Reuters reported earlier, citing engineers.

Brent crude rose as much as 2 per cent on Thursday on reports of the disruption, before closing 1.6 per cent higher at $81.36 a barrel.

Last week, oil prices posted a third weekly gain as a sharp cooling in US inflation triggered hope that the US Federal Reserve would ease off from further aggressive interest rate increases.

Earlier this month, the Fed hit pause on raising interest rates for the first time since it started its monetary tightening cycle in March 2022, to assess the effect on the economy.

However, it signalled it would resume raising rates again this year if needed. Its next meeting will be held on July 25 and July 26.