Oil swings as weak China data undercuts bullish demand outlook

Oil prices fluctuated as traders weighed bullish forecasts from the International Energy Agency against weaker-than-expected economic data out of China.

West Texas Intermediate swung in a narrow range around $71 a barrel, after gaining 1.5 per cent Monday. Global benchmark Brent crude hovered near $75.

The IEA raised its global demand outlook by about 200,000 barrels a day and projected the market to shift to deficit this summer. Nevertheless, data released Tuesday pointed to China’s economy losing momentum, even if the nation’s oil refineries continue processing near-record levels of crude while some halt for maintenance.

“Expectation for China growth has really been tempered and that’s lingering in the market,” said Norbert Ruecker, head of economics and next generation research at Julius Baer. 

Oil has declined more than 11 per cent since the start of this year as China’s recovery disappointed some bulls, while the potential for a US recession weighs on the global demand outlook. Hedge funds have piled into short bets on ICE Brent futures, although speculators are less bearish on US crude. 

The US has solicited bids for as much as 3 million barrels of sour crude for its Strategic Petroleum Reserve, with deliveries planned for August and awards to be announced in June, the Energy Department said Monday. The agency released more than 200 million barrels last year, in part to curb higher prices.

Industry data on US inventories are expected later Tuesday.


  • WTI for June delivery eased 0.1 per cent to $71.06 a barrel at 12:53 p.m. in London, erasing an earlier gain.
  • Brent for July settlement fell 0.2 per cent to $75.11 a barrel.

The IEA said it expects global demand to reach a record 102 million barrels a day this year as China’s demand hits an all-time high. The agency also noted that Russia’s oil exports rose in April to the highest level since the country invaded Ukraine, and that its pledged crude-output cuts have yet to be implemented.

Meanwhile, the EU’s top foreign policy representative said in an interview with the Financial Times that member states must take measures against Russian oil flowing into Europe via India.

© 2023 Bloomberg L.P.

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