Oil held near its lowest level in almost three months on persistent concerns over the demand outlook in China and the US.
(Bloomberg) — Oil held near its lowest level in almost three months on persistent concerns over the demand outlook in China and the US.
West Texas Intermediate futures steadied above $67 a barrel, after losing more than 7% over the previous three sessions, while global benchmark Brent hovered near its lowest close since December 2021.
Sluggish Chinese trade data, as well as international flights from Northeast Asia still far below pre-pandemic levels, highlight the lackluster recovery in the world’s biggest crude importer. The nation’s central bank tried to spur growth with an unexpected short-term interest rate cut on Tuesday. Beijing is also mulling a broad package of stimulus measures, according to people familiar.
A slowdown in the US and resilient Russian exports are adding to the downward pressure, canceling out Saudi Arabia’s recent decision to cut 1 million barrels a day of production. Goldman Sachs Group Inc. lowered its oil price forecasts for the third time in six months on Sunday, saying it sees supplies swelling and demand waning.
Widely watched timespreads are also signaling ample supply. The prompt spread for WTI crude sank deeper into so-called contango, while Brent’s structure also weakened.
“Prospects of a Western slowdown and uneven Chinese recovery has weighed on the demand outlook,” said Ravindra Rao, head of commodity research at Kotak Securities Ltd. “This has countered the output cut by Saudi Arabia.”
Still, there are signs of fresh physical demand, with US sour crude prices at their strongest in a year following the nation’s pledge to refill its strategic reserves. Also, moderating US inflation is set to support the Federal Reserve’s efforts to pause interest-rate hikes this week, which could buoy consumption.
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