On Monday, concerns about rising interest rates, the global economy, and fuel demand caused oil prices to decrease, outweighing support from the prospect of tighter supplies on OPEC+ supply cuts.
Brent crude and U.S. West Texas Intermediate crude both fell 90 cents to $81.2 and $77.7 a barrel, respectively.
The previous week, both contracts fell more than 5%, their first weekly drop in five, due to weak U.S. economic data, disappointing corporate earnings from the tech sector, and a decrease in implied gasoline demand.
According to CMC Markets analyst Tina Teng, weak U.S. economic data and disappointing corporate earnings from the tech sector have caused growing concerns and risk aversion among investors.
Additionally, the stabilizing U.S. dollar and climbing bond yields are increasing pressure on commodity markets. In early May, central banks from the United States, Britain, and Europe are expected to raise interest rates to address high inflation.
Despite China’s bumpy economic recovery from COVID-19, Chinese customs data showed record volumes in March for the world’s top crude importer, with imports from top suppliers Russia and Saudi Arabia each topping 2 million barrels per day (BPD).
Read more: OPEC+: Voluntary reduction a precautionary measure to support oil market stability
Despite record production from China and India’s top refiners, refining margins in Asia have weakened, reducing the region’s demand for Middle East supplies loading in June.
However, analysts and traders remain optimistic about China’s fuel demand recovery in the second half of 2023, with OPEC+ planning additional supply cuts from May that could further tighten markets. Independent oil markets expert Sugandha Sachdeva predicts that planned output cuts by OPEC+ and a strong demand outlook from China could boost prices shortly, with Brent likely to find key support at $79 a barrel and WTI crude at $75 a barrel.
In the United States, energy firms added oil and natural gas rigs for the first time in four weeks, according to energy services firm Baker Hughes Co.
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