Oil fell as investors fretted that China’s plans to support the economy lacked follow-through, with crude tracking other commodities lower.
West Texas Intermediate traded near $71 a barrel after climbing more than 2 percent last week as China cut interest rates and hinted that further support would be delivered. Still, a State Council meeting in Beijing on Friday ended with little detail on any new measures to revive the world’s largest crude importer.
Crude-trading volumes, especially for WTI, may be lower than usual on Monday as the US marks the Juneteenth holiday. With some trading desks thinned out, the US crude benchmark’s prompt spread remains firmly in contango, a bearish pricing pattern that indicates ample near-term supply.
Oil has retreated in the first half of the year as China’s recovery from Covid Zero underwhelmed and global supplies, including from Russia, remained abundant. In a bid to stem the slide, the Organization of Petroleum Exporting Countries and its allies have announced supply cuts, including a voluntary reduction from Saudi Arabia of 1 million barrels a day that’ll start from July.
“Prices continue to be locked within a consolidation pattern,” said Yeap Jun Rong, market strategist for IG Asia Pte. The worst economic conditions have yet to be seen, which may keep prices low for longer, he said.
Also in focus was the second day of a visit by US Secretary of State Antony Blinken to Beijing after what was seen as a positive start to the trip given the extended talks held in the Chinese capital on Sunday.
While Chinese media has been awash with reports that further economic support will be forthcoming, details remain scarce. Goldman Sachs Group Inc. became the latest bank to cut forecasts for Asia’s largest economy, citing limited options to increase stimulus, according to a research report on Sunday.
Both OPEC and the Paris-based International Energy Agency have forecast that the crude market will tighten substantially in the second half. Still, crude stockpiles at the key hub in Cushing, Oklahoma, have hit a two-year high.
Source: Al Arabiya