SINGAPORE, May 15 (Reuters) – Oil prices fell on Monday as worries about fuel demand in top global oil consumers the United States and China offset bullish sentiment about tightening supplies from potential OPEC+ cuts and a resumption of U.S. purchases for reserves.
Brent crude futures fell 62 cents, or 0.84%, to $73.55 a barrel by 0348 GMT, while US West Texas Intermediate crude was at $69.48 a barrel, down 56 cents, or 0.8 %.
Last week, both benchmarks fell for a fourth straight week, the longest streak of weekly declines since September 2022, amid concerns that the US could enter a recession due to “significant risks” of historic defaults within the first two weeks of June.
Investors sought safe havens such as the US dollar, strengthening the currency and making dollar-denominated commodities more expensive for holders of other currencies.
“Oil prices remain under pressure on weak demand outlook as China’s economic reopening progress appears bumpy,” CMC Markets analyst Tina Teng said, adding that the US bankruptcy rout has also caused market jitters.
Investors will sift through China’s reams of economic data on industrial production, fixed asset investment and retail sales in the coming week for signs of recovery in oil demand, she said.
“With the uneven reopening in China and concerns that the US is facing a growth slowdown at a time when the X-date for the debt ceiling is fast approaching, topped by a rally in the US dollar, market sentiment towards crude oil will remain tepid at best,” said IG analyst Tony Sycamore.
Still, global crude supplies could tighten in the second half of the year as the OPEC+ group, the Organization of the Petroleum Exporting Countries, and its allies including Russia make further production cuts that reduce the availability of sour crude.
The group announced in April that some members would further cut output by about 1.16 million barrels per day, bringing the total volume of cuts to 3.66 million bpd, according to Reuters calculations.
However, Iraq does not expect OPEC+ to further cut oil production at its next meeting in June, the country’s oil minister Hayan Abdel-Ghani said.
The United States can begin buying back oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale in June, Energy Secretary Jennifer Granholm told lawmakers on Thursday.
That announcement followed a weekly report from energy services firm Baker Hughes Co ( BKR.O ) that showed U.S. oil rigs fell by two to 586 this week, the lowest since June 2022, while gas rigs plunged by 16 to 141.
Meanwhile, leaders of the Group of Seven (G7) nations may announce new measures at their meetings on 19-21. in May aimed at evading sanctions involving third countries, officials with direct knowledge of the discussions said.
The tightening of sanctions would also seek to undermine Russia’s future energy production and curb trade that supports the Russian military, the people said.
India and China, the world’s No. 3 and No. 1 crude importers, have been the main buyers of Russian crude since the EU embargo began in December.
Reporting by Florence Tan; Editing by Muralikumar Anantharaman
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