Sluggish demand recovery in the world’s top crude importer China is continuing to weigh down oil prices, despite Saudi Arabia and Russia cutting output this week.
Both major benchmarks are barely moving this morning, with WTI Crude down 0.01 per cent at $71.78 per barrel, while Brent Crude slipped 0.22 per cent at $76.48 per barrel.
Demand concerns have persisted for months over China’s slow economic recovery.
Despite the lifting of pandemic restrictions, global macroeconomic headwinds and interest rate hikes by central banks across developed economies have suppressed any prospect of further price rallies.
China’s services activity expanded at the slowest pace in five months in last month, according to a private-sector survey reported by news agency Reuters.
Ian Williams, analyst at Peel Hunt, said: “The oil price continues its pullback as the impact of extended production cuts is overwhelmed by demand worries.”
Saudi Arabia’s announcement to further slash supplies this week alongside a larger than anticipated decline US crude stocks has prevented prices from falling further – after four consecutive quarters of Brent Crude sliding.
The country’s energy minister Prince Abdulaziz bin Salman warned OPEC and its allies (OPEC+) will do “whatever necessary” to support the market, and that its partnership with Russia – which has also cut output – remained robust.
OPEC+ pumps around 40 per cent of the world’s crude, and has cut oil output since November in a bid to boost prices – however, it has found its ability to influence prices increasingly limited.
Craig Erlam, senior market analyst Oanda said: “The previous high in Brent two weeks ago came just above $77 and a failure to hit that will represent yet another lower peak over the last month or so and may, therefore, merely confirm that we remain in a very gradual consolidation.
“We do appear to have seen a slight uptick in momentum over the last couple of days though so perhaps we’re going to see a real test of the previous peak, a break of which could be quite bullish.”
US government data on crude inventories is due later today – which could be the next factor to drive or weigh down prices.