Oil drops as Chinese demand worries recession fears

LONDON (Reuters) – Oil prices fell on Monday, snapping five straight days of gains as investors looked to slow economic activity in China, the world’s largest crude importer, reviving fears of a global recession and sagging global fuel demand.

Brent crude futures for December settlement were down 1.1% and last fell 86 cents, or 0.9%, to $97.06 a barrel by 1111 GMT.

West Texas Intermediate crude for November delivery was down 1.1% and was last at $91.94 a barrel, down 70 cents, or 0.8%.

Saturday’s data showed that service activity in China during September contracted for the first time in four months as COVID-19 restrictions weighed on demand and business confidence. Read more

The slowdown in the economy of China, the world’s second largest oil consumer after the United States, is adding to growing concerns about a possible global recession caused by many central banks raising interest rates to combat high inflation.

“Oil … is affected by the triple whammy of Chinese economic weakness, US monetary policy tightening, and the Biden administration’s SPR intervention,” Stephen Innes, managing director of SPI Asset Management, said in a note.

Ennis was referring to the possibility of additional releases from the US Strategic Petroleum Reserve next month in response to the decision of the Organization of the Petroleum Exporting Countries (OPEC) last week and allies including Russia, known as OPEC +, to cut their production target by two million barrels. in a day. Read more

Brent and West Texas Intermediate posted their biggest weekly percentage gains since March after the cut was announced.

The OPEC+ cuts, which come before the European Union’s ban on Russian oil, will squeeze supplies in an already tight market. EU sanctions on Russian crude and oil products will take effect in December and February, respectively.

“The OPEC+ decision … will have a mild impact on the oil supply market as actual production cuts will be smaller,” Fitch said on Monday, noting that the combined group is already producing less than its previous quotas.

She added that “expectations of economic stagnation will lead to a decrease in demand for oil.”

Additional reporting by Florence Tan and Emily Chow. Editing by Jacqueline Wong, Christian Schmolinger and Louise Heavens

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