Fears over China's demand balance tighter supply projections, keeping oil prices stable

6 Jul 2023 , 12:08 PM

Early Asian trading on Thursday saw little movement in oil prices as concerns over a sluggish demand rebound in China outweighed the likelihood of tighter supply due to output curbs from Saudi Arabia and Russia as well as a larger-than-expected drop in U.S. crude storage. 

Brent crude futures were down 2 cents to $76.63 a barrel after closing the previous day up 0.5%.

In order to catch up with Brent’s gains earlier in the week, U.S. West Texas Intermediate crude closed at $71.90 a barrel on Thursday, up 11 cents, or 0.2%, after closing 2.9% higher on Wednesday in post-holiday trade.

According to news reports quoting American Petroleum Institute data, U.S. crude stocks decreased by around 4.4 million barrels in the week ending June 30, but gasoline and distillate inventories increased. According to a Reuters survey of analysts, the amount of petroleum stockpiles will decrease by around 1 million barrels.

On Thursday, the government is scheduled to release data on American inventories.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, stated on Wednesday that the OPEC+ alliance will continue to do ‘whatever necessary’ to stabilize the market and that Saudi Arabia and Russia’s oil cooperation is still continuing strong.

Amid global macroeconomic headwinds, central bank interest rate hikes, and China’s delayed economic recovery, oil prices recently traded around their two-week highs but have down 10% so far this year. These factors are in addition to China’s gradual economic rebound following the easing of pandemic restrictions.

A private sector survey released on Wednesday revealed that China’s services activity rose at the weakest rate in five months in June as deteriorating demand slowed the momentum of the post-pandemic recovery. This further harmed the forecast for demand.

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