Brent falls amid concerns over weakening Chinese demand

The front-month ICE Brent contract was down $0.41/bbl on the day to trade at $83.75/bbl at 0900 GMT.

Upward pressure:

Brent prices found some support after the American Petroleum Institute (API) estimated a 4.44 million barrel drop in US crude inventories in the week ended July 12.

Market analysts polled by Reuters had expected a draw of 33,000 barrels. A drop in U.S. crude inventories is seen as a positive sign of rising oil demand in the world’s largest oil-consuming nation and could push oil prices higher.

Russian Deputy Prime Minister Alexander Novak has assured that the world oil market will remain well balanced, even as some OPEC+ producers will gradually start increasing production in the fourth quarter of this year, according to reports.

“The (oil) market will always be balanced because of our (OPEC+) actions,” Russian state media agency TASS quoted Novak as saying.

Russia plans to deepen production cuts to make up for extra crude pumped above its quota in 2024.

Down pressure:

Concerns about slowing oil demand growth in China continued to limit gains in Brent prices this week.

The country’s crude output in June hit its lowest level this year and raised concerns about rising demand for petroleum products. Chinese refineries processed about 58.32 million t (14.19 million b/d) of crude oil in June, down 3.7 percent from the same period last year, according to data from the National Bureau of Statistics (NBS) of China.

“Oil demand from China appears to be weighing on (oil) prices,” said Phil Flynn, principal market analyst at Price Futures Group.

Brent felt lower pressure as the greenback gained strength against other major currencies following a failed assassination attempt on former US President Donald Trump. This news increased bets on Trump’s victory in the upcoming US elections.

A stronger US dollar makes commodities like oil more expensive for non-dollar holders and affects demand growth in the market.

“Oil prices posted their strongest decline in three weeks, driven by a stronger dollar and signs of easing demand,” analysts at Saxo Bank said in a client note.

Source: ENGINE by Aparupa Mazumder