On Wednesday, oil prices plummeted in Asian trading as disappointing Chinese trade data fueled new worries about weakening demand in the nation. Prices have now completely reversed all gains from earlier this week due to OPEC production cutbacks. In May, China’s trade surplus hit a 13-month low, primarily due to a surprising decline in exports as global demand for Chinese goods dried up. Additionally, imports decreased, indicating dismal economic trends in the top oil importer in the world.
The measurements reinforced recent statistics that indicated a slowing in China’s post-COVID economic recovery, undermining predictions that China would push oil demand to record highs this year. Brent oil prices were down 0.4% to $76.00 per barrel and West Texas Intermediate crude futures were down 0.3% to $71.49 per barrel. On Tuesday, both contracts experienced a turbulent session before ending roughly 0.6% lower. After Saudi Arabia promised to further reduce output in July, the price of crude had increased by as much as 3% at the start of the week.
But after a series of dismal economic indicators, they later undid all of their early gains. Russian oil exports in particular appeared to be maintaining a stable level of output, as did those of other OPEC+ countries. Nevertheless, the U.S. Energy Information Administration (EIA) predicted that when Saudi Arabia and OPEC+ implement production cutbacks in the second half of the year, oil markets will become more constrained and prices will be marginally supported. By the end of 2023, the agency predicts that Brent will trend just below $80.
Oil markets reacted differently to industry data showing that U.S. oil stockpiles decreased more than anticipated in the previous week as demand for the summer season increased. However, given that U.S. economic activity appeared to be slowing, evidence of an unexpected increase in petrol and distillate inventories made it unclear how much fuel demand was improving. This came after statistics earlier in the week revealed that German manufacturing orders declined through April while U.S. service sector growth slowed significantly in May. Despite several attempts from OPEC to restrict supply and raise prices, oil prices have remained low due to concerns about a worldwide recession that could hinder oil demand this year.
