Oil futures fell Monday, with U.S. and global benchmark prices settling at their lowest in a week after data on China’s economic growth fell short of expectations, raising concerns over the outlook for energy demand.
Price action
-
West Texas Intermediate crude for August delivery
CL00,
+2.12%CL.1,
+2.12%CLQ23,
+2.12%
fell $1.27, or 1.7%, to settle at $74.15 a barrel on the New York Mercantile Exchange, the lowest finish in a week, according to Dow Jones Market Data. Prices on Friday fell 1.9%. -
September Brent crude
BRN00,
+0.06%BRNU23,
+0.06%,
the global benchmark, dropped $1.37, or 1.7%, to $78.50 a barrel on ICE Futures Europe, also the lowest since July 10. -
Back on Nymex, August gasoline
RBQ23,
+2.38%
fell nearly 0.5% to $2.63 a gallon, while September heating oil
HOU23,
+1.45%
shed 1.3% to $2.56 a gallon. -
September natural gas
NGU23,
+4.07%
lost 1.1% at $2.51 per million British thermal units, the lowest settlement since June 20.
Market drivers
China reported that its economy grew 6.3% year over year in the second quarter, missing expectations for 7.1% growth. This prompted Wall Street analysts to mark down forecasts for the world’s second-largest economy early Monday. Disappointment in China’s rebound following the lifting of strict COVID-19 curbs on activity has been cited as a factor keeping crude under pressure in 2023.
Also see: Why Russia’s decision to halt grain deal is stirring global inflation worries
The Chinese GDP data “dented the markets’ view on future oil demand,” said Ricardo Evangelist, senior analyst at ActivTrades, in market commentary.
“China is the world’s top oil importer, and its GDP figures missed the consensus by a full percentage point, posing a big question on the pace of the recovery in the world’s second-largest economy and hitting oil prices as expectations for future demand were downgraded,” he said.
Oil prices, however, have risen for three straight weeks. Last week’s gains came as the U.S. dollar extended a slide on expectations the Federal Reserve is nearing the end of its cycle of rate hikes. A weaker dollar can be supportive for commodities priced in the unit, making them less expensive to users of other currencies.
Supply cuts by Saudi Arabia and Russia have also helped buoy crude amid expectations for the global market to move into deficit in the second half.
“While China transport activity and apparent demand are meeting expectations of a rebound, traders could turn increasingly concerned that signs of slowing in the broader economy will begin to impact the demand in [the third quarter] onwards, negatively impacting the bullish thesis,” Stephen Innes, managing director of SPI Asset Management, said in a note.
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