As demand optimism wanes, oil prices begin the week lower

OPEC released its monthly oil market report last week, keeping its annual demand growth forecast unchanged at over 2 million bpd. However, the IEA also released a new market report last week, and, as has become usual, had very different projections for both demand and supply. The IEA forecast a “staggering” supply overhang of 8 million bpd in spare production capacity by 2030. The forecast angered OPEC, which called the prediction “dangerous” and warned it could inject additional volatility into oil markets.

On the other hand, Bloomberg noted that oil prices were still holding on to their biggest gain since April, made last week, but could change when traders processed the latest data from China. That data included retail sales, which rose in May, and industrial output, which disappointed.

Retail sales in China added 3.7% last month, rising from 2.3% in April in what was the fastest pace of growth since February, per Reuters. Industrial output also rose by a pretty solid 5.6% last month. However, traders had expected 6% in growth, making any lower number disappointing and affecting their oil-trading decisions.

Bloomberg noted that oil prices, still reflecting last week’s biggest gain since April, could shift with new Chinese data. In May, China’s retail sales rose 3.7%, up from April’s 2.3%, while industrial output increased by 5.6%, below the expected 6%. This discrepancy might influence traders’ oil-trading decisions.

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