Oil falls as China’s economy falters in May. In May, China’s industrial output and retail sales growth missed predictions, confirming fears about a lackluster economic recovery in the world’s top oil importer.
By 0400 GMT, Brent crude futures fell 21 cents to $72.99. WTI slipped 20 cents, or 0.3%, to $68.07 a barrel.
After the U.S. Federal Reserve projected further rate hikes this year, both benchmarks sank 1.5% on Wednesday amid concerns that higher interest rates will slow the economy and lower oil consumption.
On Thursday, China’s economic comeback slowed, raising demand concerns.
As manufacturers struggled with poor domestic and foreign demand, China’s industrial output climbed 3.5% in May, down from 5.6% in April and below the 3.6% forecast by analysts in a Reuters poll.
Retail sales, a crucial consumer confidence indicator, grew 12.7%, missing predictions of 13.6% and dropping from April’s 18.4%.
Phillip Nova market analyst Priyanka Sachdeva claimed Chinese data was depressing oil prices.
“China’s post-COVID recovery has been bumpy and the mellowed first quarter economic standing has completely swept away any forecast of China’s revival pushing the global demand for oil to record highs,” Sachdeva said.
On Wednesday, the Energy Information Administration said that U.S. crude oil stocks grew by 8 million barrels in the week ending June 9, a pessimistic indicator for oil demand. Analysts predicted a 500,000-barrel drop.
Diesel and gasoline stockpiles climbed unexpectedly.
“Looking at the U.S., the driving season seems to be off to a weak start and while total petroleum implied demand seems healthy (excluding NGLs and other oils), it would still point to a 0.3 million b/d annual decline year-to-date,” Citi analysts said Thursday.
“Indeed, visible global oil inventories also continue to move higher,” analysts said.
On Thursday, the European Central Bank will likely boost borrowing costs to their highest level in 22 years and leave the door open to more hikes, adding to market concerns about lower fuel demand.
A Reuters survey of experts indicated that the Bank of England is still raising rates to fight inflation.
