Oil Market Slides on Chinese Economic Growth Worries
By Adedapo Adesanya
The oil market fell on Monday over worries about China’s economy, even as the country has been projected to lead growth this year.
Data revealed that Brent crude lost 48 cents or 0.6 per cent yesterday to quote at $76.13 a barrel, as the United States West Texas Intermediate (WTI) crude was down 49 cents or 0.7 per cent to $71.29 per barrel.
Trading volumes were thin due to the Juneteenth holiday celebrated in the US every June 19.
Both contracts ended last week with gains of more than 2 per cent.
The market feared for China, the world’s largest crude oil importer, as several major banks cut their 2023 gross domestic product (GDP) growth forecasts after May data showed a post-COVID recovery was faltering.
Nomura, a Japanese bank, cut its forecast for China’s 2023 GDP growth to 5.1 per cent from 5.5 per cent. This followed similar moves by UBS, Standard Chartered, Bank of America (BoA), and JPMorgan (JPM.N).
The banks now expect China’s GDP growth to be between 5.1 per cent and 5.7 per cent this year, down from an earlier range of 5.5 per cent to 6.3 per cent.
Data on Thursday showed China’s economy stumbled in May, with industrial output and retail sales growth missing forecasts, adding to expectations that the world’s second-largest economy will need to do more to shore up a shaky post-pandemic recovery.
The Asian giant is widely expected to cut its benchmark loan rates on Tuesday after a similar reduction in medium-term policy loans last week to shore up a shaky economic recovery.
This development outweighed output cuts by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and the seventh straight drop in the number of oil and gas rigs operating in the US.
This month, the OPEC+ alliance agreed on a new oil output deal, and the group’s biggest producer, Saudi Arabia, also pledged to make a deep cut to its output in July.
However, rising Iranian oil exports also weighed on prices as Iran’s crude exports and oil output have hit record highs in 2023 despite sanctions from the US.