Oil slips as China’s demand worries fuel recession fears

  • Brent and WTI fall nearly $1 from five-week highs
  • OPEC+ offer slows decision boosted prices
  • Chinese service sector contracts for first time in months

LONDON, Oct 10 (Reuters) – Oil prices fell on Monday, ending five days of gains, as investors watched for a slowdown in economic activity in China, the world’s biggest crude importer, fueling concerns of a global recession and falling global fuel demand.

Brent crude futures for December settlement fell as much as 1.1% and were down 40 cents, or 0.4%, at $97.52 a barrel by 1240 GMT.

West Texas Intermediate crude for November delivery fell as much as 1.1% and was last at $92.29, down 35 cents, or 0.4%.

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Services activity in China during September fell for the first time in four months as COVID-19 restrictions hit demand and business confidence, data showed on Saturday. read more

The decline in China, the world’s second largest oil consumer behind the US, is contributing to growing concerns about a possible global recession triggered by several central banks raising interest rates to combat high inflation.

“Oil … is being hit by the triple whammy of China’s economic weakness, US monetary policy tightening and the Biden administration’s SPR intervention,” Stephen Innes, chief executive of SPI Asset Management, said in a note.

Innes was referring to the possibility of further releases from the US Strategic Petroleum Reserve (SPR) next month in response to the decision last week by the Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+, to lower their production target. with 2 million barrels per day. read more

Brent and WTI posted their biggest weekly percentage gains since March after the reduction was announced.

The OPEC+ cuts, which come ahead of an EU embargo on Russian oil, will squeeze supply in an already tight market. EU sanctions against Russian crude oil and oil products come into force in December and February respectively.

“OPEC+’s decision … will have a muted impact on the oil supply market as actual production cuts will be smaller,” Fitch Ratings said on Monday, adding that the group collectively was already producing less than its previous quotas.

“A recession will lead to lower oil demand,” it added.

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Reporting by Noah Browning Additional reporting by Florence Tan and Emily Chow Editing by Louise Heavens and David Goodman

Our standards: Thomson Reuters Trust Principles.

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