Weak Chinese data reversed the gains driven by OPEC, causing oil prices to fall

Oil prices in Asia trade on Wednesday declined as a result of weak Chinese trade data, intensifying concerns about reduced demand in the country. These price declines have now nullified all the gains made earlier in the week, which attributed to supply cuts by the OPEC.

China’s trade surplus hit a 13-month-low in May, with a drop in exports and weak imports signalling challenging economic trends for the world’s largest oil importer. 

The latest readings contribute to existing data indicating a slowdown in China’s post-COVID economic rebound. This undermines expectations that China will push oil demand to reach record levels this year.

It seems that the prices of Brent oil futures and West Texas Intermediate (WTI) crude futures have declined slightly. As of 23:37 ET (03:37 GMT), Brent oil dropped by 0.4% to $76.00 per barrel, and WTI crude futures decreased by 0.3% to $71.49 per barrel. Fluctuations in oil prices can be influenced by various factors such as global supply and demand, geopolitical events, and economic conditions.

Crude prices initially rose up to 3% after Saudi Arabia’s pledge of more production cuts in July but later reversed all gains due to weak economic readings.

Other members of OPEC+, particularly Russia, also appeared to be keeping production steady.

The U.S. Energy Information Administration (EIA) anticipates tightening oil markets in the second half of the year due to supply cuts by Saudi Arabia and OPEC+. This is expected to somewhat support prices, with Brent oil projected to trend just below $80 by the end of 2023.

Oil markets reacted to mixed industry data. While U.S. Crue inventories declined more than expected, indicating rising summer demand, unexpected increases in gasoline and distillate inventories raised doubts about the strength of fuel demand amid a potential slowdown in U.S. economic activity.  

Australia’s economy barely grew in Q1 2023, adding to the list of weak economic readings.

US service sector growth slowed in May, while German factory orders contracted in April, adding to the weak economic data.

Fears of a global recession have kept oil prices low, despite OPEC’s efforts to reduce supply and improve prices.

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