By Adedapo Adesanya
The oil market depreciated on Monday as worries about demand in top importer China offset supportive US economic news while the market continues to weigh ongoing Middle East tensions.
Brent futures fell by 18 cents or 0.2 per cent to settle at $84.85 a barrel and the US West Texas Intermediate (WTI) crude dropped 30 cents or 0.4 per cent to trade at $81.91 per barrel.
China’s economy expanded far slower than predicted in the second quarter, as a prolonged housing crisis and job uncertainty sucked the wind out of a fragile recovery, fueling speculation that the world’s largest oil importer may need to release even more stimulus.
In June, China’s refinery production decreased by 3.7 per cent compared to the previous year due to scheduled maintenance, lower processing margins, and low fuel demand. Independent units also reduced output.
In the US, the market focused on the assassination attempt on former President Donald Trump, which some say could boost his re-election chances.
Also, US Federal Reserve Chair Jerome Powell said inflation readings for the second quarter do “add somewhat to confidence” that the pace of price increases is returning to the US central bank’s target sustainably, remarks that suggest a turn to interest rate cuts may not be far off.
The US Federal Reserve hiked rates aggressively in 2022 and 2023 to tame a surge in inflation. Borrowing costs rose for consumers and businesses, slowing economic growth and reducing oil demand. Lower interest rates could boost oil demand.
Geopolitical concerns in the Middle East have continued to bolster oil prices, experts believe, even though Saudi Arabia and other Organisation of Petroleum Exporting Countries (OPEC) members have abundant spare capacity.
In the Red Sea, two warships were attacked off Yemen’s port city of Hodeidah, with one ship reporting minor damage.
There were no immediate claims of responsibility for the incident. However, since November, Iran-backed Houthi terrorists have conducted drone and missile attacks on trade channels in the Red Sea and Gulf of Aden. The organisation claims their acts are in solidarity with Palestinians devastated by Israel’s conflict in Gaza.
OPEC and its allies, OPEC+ have implemented a series of output cuts since late 2022 to support the market. The group agreed on June 2 to extend the latest cut of 2.2 million barrels per day until the end of September and gradually phase it out from October.
Dipo Olowookere