By Adedapo Adesanya
Crude oil futures eased on Tuesday following disappointment with China, the world’s second-biggest oil consumer, after the size of cuts in its key lending rates.
Brent futures fell 19 cents or 0.3 per cent to settle at $75.90 a barrel while the US West Texas Intermediate (WTI) crude slumped by $1.28 or 1.8 per cent to quote at $70.50 per barrel.
China cut its key lending benchmarks on Tuesday, the first such reductions in 10 months, as the government seek to shore up a slowing economic recovery, although concerns about the property market meant the easing was not as large as expected.
The latest monetary loosening comes as a post-pandemic recovery in the world’s second-largest economy shows signs of losing the initial momentum seen in the first quarter.
The price drop, however, was limited by expectations that oil demand will grow in China and India in the second half of the year.
Also, India is predicted to surpass China as the largest driver of global oil demand, according to the International Energy Agency (IEA).
IEA’s Chief, Mr Fatih Birol, made the announcement at a G20 event in New Delhi recently, citing the rapidly growing electrification of cars and buses in China as one of the reasons.
Mr Birol expressed hope that India, which he said has abundant renewable energy capacity, will move closer [to China] in terms of electrification.
The IEA’s oil market outlook report also indicated that about three-quarters of the 2022-2028 demand growth increase will come from Asia, with India surpassing China as the main source of growth by 2027.
However, China’s fuel oil imports dipped in May after hitting a decade high in April, while exports of low-sulphur marine fuels rose.
The Chinese government met last week to discuss measures to spur economic growth, and several major banks cut their 2023 economic growth forecasts for China amid fears that its post-COVID recovery is faltering.
Adding to the bearish market sentiment, traders noted crude supplies from Iran and Russia have increased in recent weeks.
Iran’s crude exports and oil output have hit new highs this year despite US sanctions, while Russia is also set to increase seaborne diesel and gasoil exports this month, outweighing cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and allies, OPEC+
Modupe Gbadeyanka