TOKYO/NEW DELHI: Oil prices continued their decline on Monday, extending losses from the previous week due to concerns over sluggish demand in China. However, the drop was tempered by ongoing geopolitical tensions in the Middle East and Russia.
Brent futures slipped by 12 cents, or 0.2%, to $81.96 a barrel by 0723 GMT, while U.S. West Texas Intermediate (WTI) fell by 21 cents, or 0.2%, to $77.80.
Both benchmarks experienced declines last week, with Brent down by 1.8% and WTI by 2.5%, driven by bearish Chinese data indicating softer demand from the world’s leading crude importer.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, remarked, “Worries over weak demand in China outweighed the extension of supply cuts by OPEC+,” adding that mixed signals from U.S. jobs data prompted some traders to adjust their positions.
Nevertheless, Kikukawa highlighted that geopolitical risks, such as the ongoing Hamas-Israel conflict and potential escalation in tensions between Russia and its neighbors, could limit further losses.
Recent U.S. data showed accelerated job growth in February, but concerns lingered over a rise in the unemployment rate and moderation in wage gains, which kept expectations of a Federal Reserve interest rate cut in June alive.
China also announced an economic growth target for 2024 of around 5%, which some analysts considered ambitious without significant additional stimulus.
While China’s crude oil imports in the first two months of the year were higher than the same period in 2023, they remained weaker compared to previous months, reflecting a continued softening in purchases by the world’s largest buyer.
On the supply side, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, agreed earlier this month to extend voluntary oil output cuts of 2.2 million barrels each day into the second quarter.
Analysts at ANZ Research noted, “With OPEC+ extending its voluntary production cut agreement until the end of the second quarter, this could tighten the market as demand recovers from its seasonal lull.”
