SINGAPORE: Oil prices eased on Thursday as worries over demand due to a seasonal slowdown during winter and an uncertain economic outlook for China outweighed expectations of tighter supplies from extended production cuts by Saudi Arabia and Russia.
Brent crude futures fell 36 cents to $90.24 a barrel by 9:45 a.m. Saudi time, after a nine-session winning streak. US West Texas Intermediate crude futures fell 37 cents to $87.17 a barrel after seven sessions of gains.
Both benchmarks had spiked earlier in the week after Saudi Arabia and Russia, the world’s top two oil exporters, extended voluntary supply cuts to the year-end. These were on top of the April cuts agreed by several members of the Organization of the Petroleum Producing Countries and its allies, known as OPEC+, running to the end of 2024.
“At present, it is really difficult for us to see any negative factors due to supply constraints. However, we need to consider possible demand risks such as in the fourth quarter, the market could slow into an off peak season for oil consumption after summer demand ends,” said CMC Markets’ Shanghai-based analyst Leon Li.
Market participants also digested mixed data from China. Overall exports fell 8.8 percent in August year on year and imports contracted 7.3 percent. But crude imports surged 30.9 percent.
Li said there were some encouraging signs for the Chinese economy. The extent of declines in trade data was less than expected and the Chinese government has also introduced a series of policy steps to boost financial and real estate markets.
However, it is still too early to judge the pace of China’s demand recovery, although it should have improved from July, he added.
Concerns about rising oil output from Iran and Venezuela, which could balance out a portion on cuts from Saudi and Russia, kept a lid on the market as well.
“OPEC+ action is being partially undermined by the return of sanctioned barrels from Iran. Iranian crude production has ranged higher in the year-to-date, reaching 2.83 million barrels per day in July, up from 2.55 million bpd in January,” said BMI research analysts in a report.
“We also note upside risk to our Venezuelan production forecast, with US officials reportedly drafting proposals to ease sanctions if Caracas progresses plans to hold new presidential elections,” they added.
Helping support prices, US crude oil inventories were projected to have fallen by 5.5 million barrels in the week ending Sept. 1, according to market sources citing American Petroleum Institute figures.
