Tuesday saw a decline in oil prices as new data increased concerns about the state of China’s post-pandemic recovery, but losses were restrained by anticipations of an extension of production curbs by key OPEC+ members.
Brent crude futures for November dipped by 65 cents; on the other hand, Texas intermediate crude October futures were down by 17 cents.
The second-largest economy in the world, China, is seen as essential to bolstering oil demand for the remainder of the year. Markets have been upset by its lackluster economic growth, as expected stimulus hasn’t materialized.
According to a private sector poll released on Tuesday, China, the world’s largest oil importer, saw its services sector develop at its slowest rate in eight months in August.
According to analysts, recent Chinese efforts to stimulate the economy have been included in market prices, counteracting the positive effects of anticipated reductions in the oil supply.
Data from Europe, meanwhile, also showed gloom. According to a study that predicts the euro zone may enter a recession, the loss in economic activity in the region quickened last month as the bloc’s major services industry shrank.
According to Russia’s deputy prime minister, a new OPEC+ production cut agreement will be announced this week, and Saudi Arabia is widely anticipated to prolong its voluntary oil cutbacks through October.
Following a 500,000 bpd reduction in August, Moscow has already declared it will reduce exports by 300,000 barrels per day in September. Additionally, Riyadh is anticipated to extend a voluntary cut of 1 million bpd until October.
“Given market expectations, it is unlikely that the two producers would stray away from an extension and so risk a sell-off in the market,” analysts from ING said in a client note.
Japan, the third-largest economy in the world, saw household spending shrink by 5.0% in July from a year earlier, exceeding the 2.5% decline that was expected, and the declines have now lasted for five months.
