Oil prices recorded a third weekly loss amid demand concerns in China, one of the top consumers of oil in the world.
Brent, the benchmark for two thirds of the world’s oil, fell 1.51 per cent to end at $81.13 per barrel while West Texas Intermediate, the gauge that tracks US crude, settled down 1.43 per cent to $77.16 a barrel.
“Oil benchmarks have been dragged lower this week by elevated concerns over Chinese demand,” Han Tan, chief market analyst at Exinity Group, told The National.
Apparent oil demand in China, a proxy for consumption when full data on oil stocks is not available, dropped by 8.1 per cent annually in June, accelerating a slump of 3.3 per cent recorded in May, amid sluggish economic growth in the world’s second largest economy, an Emirates NBD report said last week.
In volume terms, China’s apparent oil demand fell to 13.7 million barrels per day in June, down from 14.1 million bpd a month earlier and 14.9 million bpd a year earlier.
“The soft oil demand data pairs with broader signals of a sluggish economy in China,” Edward Bell, head of market economics at Emirates NBD, said.
“PMI [purchasing managers index] numbers have been close to the neutral 50 level or below [it] for most of 2024, while industrial production appears to be on a multiyear slowdown.”
China's second-quarter gross domestic product growth slowed to 4.7 per cent on an annual basis, from 5.3 per cent in the first quarter.
Meanwhile, faster-than-expected economic growth in the US, which could boost demand for oil in the world's largest economy, is supporting oil prices.
The US economy expanded by 2.8 per cent annually in the second quarter on the back of a rise in consumer spending and private investment, a report by the US Bureau of Economic Analysis said on Thursday.
“The increase in consumer spending reflected increases in both services and goods,” the report said.
Private investment rose in the wholesale and retail trade industries.
Inflation pressures also subsided, raising expectations of a cut in interest rates by the US Federal Reserve in the coming months, according to the report.
The personal consumption expenditures price index, excluding the volatile food and energy components, increased at a rate of 2.9 per cent rate, compared with an increase of 3.7 per cent in the first quarter, the data showed.
“Oil markets remain focused on existing supply-demand dynamics, even as bears appear to be getting in early ahead of the seasonal price declines. Over the past five years, crude prices have averaged monthly declines from August through November,” Mr Tan said.
Last month, Opec+ agreed to extend output cuts of 3.66 million bpd, which were initially planned to end this year, until the end of 2025 to support oil markets.
At the same time, the additional voluntary production cuts of 2.2 million bpd by eight Opec+ member states were extended by three months until the end of September.
Total oil output is expected to peak at 108 million bpd in 2030 and decline to 55 million bpd in 2050, with oil prices staying at about $50 a barrel in real terms, Rystad Energy said in a note on Thursday.
