Oil prices are falling on Tuesday on signals that the stimulus measures in China are not enough to push the country’s economy and demand for oil to robust growth.
The day before, analysts at several investment banks, including Goldman Sachs Group Inc. worsened forecasts for the Chinese economy.
The People’s Bank of China (PBOC, the country’s central bank) on Tuesday lowered its benchmark one-year lending rate (LPR) by 10 basis points (bps) to 3.55% per year. The rate on five-year loans was lowered to 4.2 percent from 4.3 percent per annum, the NBK said in a statement. The rates were lowered for the first time since August 2022.
August Brent crude futures on London’s ICE Futures exchange were at $75.82 a barrel by 8:20 a.m. Tuesday, down $0.27 (0.35%) from the previous session’s closing price. Those contracts fell $0.52 (0.7%) to $76.09 a barrel on Monday.
The price of WTI crude futures for July at electronic trades of NYMEX fell by $0.9 (1.25%) to $70.88 per barrel by that time. The day before, WTI was not traded in the main due to a holiday in the U.S.
Oil prices may end in the negative for the second quarter in a row on the background of sufficient supply in the market and expectations of weakening demand in the context of tightening of monetary policy by the world’s major central banks.
China increased oil production by 2.7 percent in May compared with the same month last year, to 18.1 million tons, according to the State Statistics Administration of the country.
Refining output soared 15.4 percent last month to 62 million tons, the second-highest total ever recorded. This was due, among other things, to the completion of scheduled maintenance work at a number of refineries.
Natural gas production in China in May increased by 7.2% and reached 19 billion cubic meters, since the beginning of this year – by 5.3% to 97.3 billion cubic meters.
Oil imports last month totaled 51.44 million tons, up 12.2 percent from the same month a year earlier, customs said. Gas imports rose 17.3% to 10.64 million tons, the highest since January 2022.
CHINA, GAS, OIL, PRODUCTION
Prices for oil of reference brands are declining Monday morning after the previous session they rose to their highest marks since June 7.
Negative impact on investors’ moods is given by concerns about the growth rate of the global economy, says Trading Economics. In particular, several major Western banks downgraded forecasts for GDP growth in China, the world’s largest importer of oil, based on recently published statistical data showing a slowdown in economic recovery in the country after the lifting of pandemic restrictions.
Brent crude futures for August delivery on London’s ICE Futures Exchange stood at $75.5 a barrel as of 7:56 a.m. ET, down $1.11 (1.45%) from the close of the previous session. Those contracts rose $0.94 (1.2%) to $76.61 a barrel on Friday.
The price of futures for WTI crude oil for July at electronic trading on the New York Mercantile Exchange (NYMEX) fell by $1.1 (1.5%) to $70.68 per barrel on Friday morning. At the end of previous session the contracts increased by $1.16 (1.6%) to $71.78 per barrel.
Over the past week, Brent gained 2.4% and WTI gained 2.3%, according to Dow Jones Market Data. This was the most significant weekly rise since early April.
Benchmark crude oil prices are declining Friday morning after a significant increase a day earlier.
Traders are worried about the likelihood of further rate hikes by the Federal Reserve and the European Central Bank, which could have a negative impact on fuel demand.
Brent crude futures for August delivery on London’s ICE Futures Exchange stood at $75.49 per barrel as of 7:57 a.m., down $0.18 (0.2%) from the close of the previous session. Those contracts rose $2.47 (3.4%) to $75.67 a barrel on Thursday.
The price of WTI futures for July crude oil on the electronic trades of the New York Mercantile Exchange (NYMEX) fell on Friday morning by $0.16 (0.2%) to $70.46 per barrel. The contract value rose by $2.35 (3%) to $70.62 a barrel at the end of previous session.
The Fed’s management decided Wednesday not to change the prime rate range (5-5.25% per year), but signaled the likelihood of further increases this year to curb consumer price growth.
The ECB, as forecasted, raised all three key interest rates by 25 basis points at the end of Thursday’s meeting – to the highest levels in 22 years. At the same time, Bank President Christine Lagarde said that the set goals in the fight against inflation have not yet been achieved. According to her, the central bank is “very likely” to raise rates again in July.
Oil prices are falling Thursday on data about a significant increase in U.S. inventories and signals that the Federal Reserve (Fed) has not yet ended its cycle of monetary policy tightening, despite a break in the rate hike at its June meeting.
The U.S. central bank kept rates in the 5-5.25 percent annual range at the end of Wednesday’s two-day meeting. Median forecasts from Fed policymakers suggest the rate will be 5.6% by the end of 2023 and 4.6% by the end of 2024.
August Brent crude futures on London’s ICE Futures exchange are at $73.01 a barrel by 8:05 a.m. Thursday, down $0.19 (0.26%) from the previous session’s closing price. Those contracts fell $1.09 (1.5%) to $73.2 a barrel on Wednesday.
The price of WTI futures for July oil fell by $0.17 (0.25 percent) to $68.1 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. The contract value fell by $1.15 (1.7%) to $68.27 per barrel at the end of previous session.
The pressure on the market caused by an increase in stocks is exacerbated by risks of weakening demand as a result of Federal Reserve policies, said Mizuho Bank Ltd. Vishnu Varathan, cited by Market Watch.
U.S. commercial oil inventories rose 7.92 million barrels to 467.12 million last week, the Energy Department said Wednesday. Commodity gasoline reserves rose 2.11 million barrels and distillates rose 2.12 million barrels.
Stocks at the Cushing terminal, where Nymex-traded crude is stored, rose by 1.5 million barrels last week, to a two-year high.
Oil prices are weakly rising on Wednesday after a jump of more than 3% in the previous session.
The previous day, the growth of quotations was contributed by the reduction of one of the key interest rates of the People’s Bank of China (PBOC), as well as reports that Beijing is preparing additional measures to stimulate economic activity in the country.
August Brent crude futures on London’s ICE Futures Exchange stood at $74.45 a barrel by 8:10 a.m. Wednesday, up $0.16 (0.22%) from the previous session’s close. Those contracts rose $2.45 (3.4%) to $74.29 a barrel on Tuesday.
The price of WTI futures for July oil grew by $0.08 (0.12%) to $69.5 per barrel at electronic trades of New York Mercantile Exchange (NYMEX) by that time. Contracts rose $2.3 (3.4%) to $69.42 a barrel in the previous session.
“China’s move toward new stimulus provides support for the oil market,” said Schneider Electric analyst Robbie Fraser, quoted by Market Watch. – The Chinese central bank’s key interest rate cut gives hope that policy easing could translate into stronger economic growth this year.”
As reported, the NBK on Tuesday cut the seven-day reverse repo rate to 1.9 percent from 2 percent.
The oil market was also supported by Bloomberg’s report that the U.S. authorities plan to replenish the strategic oil reserve (SPR) by 12 million barrels this year.
Traders’ attention on Wednesday is directed to the meeting of the Federal Reserve. Investors expect that a significant weakening of inflation will allow the Fed to pause in the cycle of tightening monetary policy and keep the benchmark interest rate unchanged (at 5-5.25%) at the June 13-14 meeting, notes Market Watch.
