The global price of a barrel of oil declined by about 2%, at the end of today, Tuesday, June 20 (2023), after China cut interest rates on lending by a less than expected percentage, which raised concerns about the outlook for oil demand in the largest importer of crude in the world.
Crude oil prices closed down on Monday, driven by concerns about the Chinese economy, as well as the seventh decline in the number of oil rigs in America, according to a Reuters report seen by the specialized energy platform.
The price of a barrel of oil globally continues to maintain the levels of the seventies, despite the weekly report of the American Baker Hughes company, on Friday, which showed that the number of oil rigs in the United States decreased by 4 during the past week, bringing the total to 552 rigs.
The global price of a barrel of oil today
At the end of the session, Brent crude futures – for August 2023 delivery – fell by 0.9%, to record $75.90 a barrel.
Meanwhile, futures contracts for West Texas Intermediate crude – delivery in July 2023 – fell by about 1.8% to $ 70.50 a barrel, after the markets were on holiday yesterday, Monday, according to figures seen by the specialized energy platform.
The July contract for West Texas Intermediate crude oil is scheduled to expire today, Tuesday, as it was scheduled to be settled yesterday, Monday, June 19, but the official holiday in America hindered that.
It is noteworthy that China cut the two main lending rates, namely the one-year loan prime rate and the five-year loan prime rate, by 10 basis points each.
This is the first cut in interest rates in China in 10 months, and it was less sharp than the expectations of observers, who expected a cut of 15 basis points, especially for lending over 5 years.
Oil price analysis
CMC Markets analyst Tina Ting said that the interest rate cuts in China were widely expected, and therefore did not provide an upward impetus to the markets, and did not affect the movement of the price of a barrel of oil globally upwards.
She explained that oil traders may need to see a tangible strong economic recovery in China, in order to improve their expectations about oil demand there.
The interest rate cuts come on the heels of recent economic data, which showed that China’s retail and factory sectors are struggling to maintain the momentum seen earlier this year, according to the specialist energy platform.
The Chinese government met last week to discuss measures to stimulate economic growth, and many major banks lowered their forecasts for 2023 economic growth for China, amid fears that its recovery would falter after Corona.
John Rong Yip, a market analyst at Singaporean IG, said: “High interest rates reduce the desire to spend, and could push down oil demand.”
On the oil supply side in global markets, Iran’s crude oil exports and production recorded new highs in 2023 despite US sanctions.
At the same time, Russia is expected to increase seaborne diesel and gas exports this month, bypassing the OPEC + cuts.
JP Morgan analysts said that the offer rebounded and surprised everyone with its upward trend from several sources, including America and non-OPEC countries, as well as Nigeria, Iran and Venezuela.
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