RIYADH: Oil prices experienced further declines on Wednesday, driven by concerns about slowing demand from China, the world’s top oil importer. Weaker-than-expected economic data from China outweighed positive progress on the US debt ceiling bill, adding to the downward pressure on crude prices.
On Wednesday, Brent crude futures for August delivery slipped 50 cents to $73.04 a barrel, while US West Texas Intermediate crude fell 46 cents to $69 a barrel. Earlier gains were reversed following the release of China’s manufacturing data. Both benchmarks had fallen by over 4 percent on Tuesday.
China’s manufacturing activity contracted at a faster pace than anticipated in May, reflecting weakening demand. The official manufacturing purchasing managers’ index dipped to 48.8 from 49.2 in April.
Traders Remains Cautious Despite US Debt Ceiling
In the United States, trader sentiment remained cautious despite positive developments regarding the US debt ceiling. Legislation brokered by President Joe Biden and House Speaker Kevin McCarthy to raise the $31.4 trillion debt ceiling and implement new federal spending cuts cleared a significant hurdle on Tuesday. It advanced to the full House of Representatives for debate and an expected vote on Wednesday.
In other oil-related news, Russia’s largest oil producer, Rosneft, reported a 45.5 percent increase in net profit for the first quarter of this year. The rise to 323 billion rubles ($4 billion) was attributed to higher output levels. Despite Western sanctions, Rosneft has demonstrated resilience by redirecting its oil flows from Europe to Asia.
However, Rosneft’s operations will be further impacted by Russia’s decision to reduce its oil output by 500,000 barrels per day, or approximately 5 percent, in order to support global oil markets. While the output cut had a minimal influence on the Q1 2023 results, it is expected to have a significant impact on the subsequent quarter.
Additionally, Iraq’s Cabinet approved $416.9 million for the construction of a third offshore export pipeline. The pipeline, with a capacity of 2 million barrels per day, will be built by Dutch company Royal Boskalis under contract with Iraq’s state-run Basra Oil Co.
Amidst mixed market dynamics and global developments, oil prices face continued volatility as demand concerns and geopolitical factors influence market sentiment.
