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Oil stabilizes as concerns over China offset reductions in supply.

ReutersAugust 14, 2023

Oil Prices Stabilize Amid Economic Concerns

By Natalie Grover

LONDON (Reuters)⁢ – Oil prices stabilized‌ on ‍Monday as concerns about China’s faltering economic recovery and ‌a stronger dollar⁢ took the momentum out of⁢ seven weeks of gains on⁤ tightening⁤ supply.

Brent⁣ crude futures slipped 42 cents to $86.39 a barrel by 1431 GMT⁤ while U.S. West Texas Intermediate crude edged 31 ‌cents lower to $82.88 a barrel.

“Crude has been in overbought territory for⁤ some ⁢time now, defying expectations of a ⁢correction,” said Vandana ‌Hari, founder of⁤ oil market analysis provider Vanda Insights.

Hari⁣ said the focus had been on U.S. ‌economic optimism, to the exclusion of economic headwinds in the eurozone and China.

“A rebalancing is overdue but it ‌may need ‌a reality check in the markets stateside,” she added.

China’s sluggish economic recovery and a stronger U.S. ‌dollar could⁤ depress‌ prices, but OPEC+ has‌ indicated it would do whatever it takes to tighten supply and stabilize markets, CMC Markets analyst Tina Teng said.

The U.S. dollar index extended gains after ⁣a slightly bigger increase in U.S. producer prices⁢ in July lifted Treasury yields ‍despite expectations ⁢the ‌Federal Reserve ⁣is at the end of ‍hiking⁢ interest rates. ⁣ [FRX/]

A stronger dollar pressures oil demand by making the ⁤commodity more expensive for buyers holding other currencies.

Meanwhile, supply cuts by Saudi Arabia and Russia, part of the alliance between the⁤ Organization of the Petroleum Exporting Countries and their allies, or OPEC+, are ⁤expected to erode⁤ oil inventories over the rest of this year, potentially driving prices even higher, the⁣ International Energy Agency said in its monthly report on Friday.

Last week’s encouraging demand estimates,‌ falling OPEC supply, declining inventories and mitigated inflationary pressure, said Tamas Varga of oil broker PVM, “is a warning signal⁣ that unless China joins the party⁢ the path upwards will be paved with ‍pitfalls”.

Separately on Monday,‍ a Shell spokesperson said exports of⁣ Nigeria’s Forcados crude oil resumed on Sunday, roughly a month after loadings of the medium⁤ sweet grade were suspended because of a potential leak‌ at ⁤the ‍export terminal.

The ‍suspension contributed to Nigeria becoming the‍ second-biggest contributor to the drop in⁣ OPEC crude oil output in July, a Reuters survey showed.

(Reporting ⁢by Natalie Grover in London; Additional reporting by Florence ⁢Tan in Singapore and ‍Mohi Narayan in New Delhi; Editing by Sonali Paul, Jason Neely and Alexander Smith)