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HomeTop NewsOil prices drop further as top oil importer China's recovery loses momentum

Oil prices drop further as top oil importer China’s recovery loses momentum

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Oil extended declines on Thursday after the previous day’s plunge, as China’s industrial output and retail sales growth in May missed forecasts, reinforcing concerns about a weak economic recovery in the world’s top oil importer.

Brent crude futures dipped 21 cents, or 0.3 percent, to $72.99 a barrel by 0400 GMT. U.S. West Texas Intermediate (WTI) crude fell 20 cents, or 0.3 percent, to $68.07 a barrel.

Both benchmarks fell 1.5 percent on Wednesday after the U.S. Federal Reserve projected the need for more rate hikes this year, triggering fears that a higher interest rate environment would slow the economy and lower oil demand.

Data from China on Thursday did little to soothe demand concerns, with signs that its economic rebound has lost momentum.

China’s industrial output grew 3.5 percent in May, down from an expansion of 5.6 percent in April and slightly below the 3.6 percent increase expected by analysts in a Reuters poll, as manufacturers struggled with weak demand at home and offshore.

The country’s retail sales, a key gauge of consumer confidence, rose 12.7 percent, missing forecasts of 13.6 percent growth and slowing from April’s 18.4 percent.

The somber Chinese data was weighing on oil prices, said Priyanka Sachdeva, market analyst at Phillip Nova.

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“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 added.

In another bearish sign for oil demand, U.S. crude oil stocks rose by about 8 million barrels in the week ended June 9, according to data from the Energy Information Administration on Wednesday. Analysts had estimated a 500,000-barrel decline.

Gasoline and diesel stocks also rose more than expected.

“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,” said Citi analysts on Thursday.

“Indeed, visible global oil inventories also continue to move higher,” the analysts added.

Adding to market jitters about weaker fuel demand, the European Central Bank is all but certain to raise borrowing costs to their highest level in 22 years on Thursday and leave the door open to more hikes.

The Bank of England is also not yet done with rate rises as it battles inflation, a Reuters poll of economists.

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