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Oil extends losses as weak demand outlook persists

A oil field worker works at a pump jack in PetroChina's Daqing oil field in China's northeastern Heilongjiang province. — Reuters
A oil field worker works at a pump jack in PetroChina's Daqing oil field in China's northeastern Heilongjiang province. — Reuters

LONDON: Oil prices fell on Tuesday as bleak economic data from top crude buyer China renewed concerns of a global recession and the market monitored talks on a reviving deal that could allow more Iranian oil exports.


Brent crude futures fell 84 cents, or 0.9 per cent, to $94.17 a barrel by 09:53 GMT. WTI crude futures dipped 45 cents, or 0.5 per cent, to $88.83 a barrel. The oil future benchmarks fell about 3 per cent in their previous sessions.


China's central bank cut lending rates to try to revive demand as the nation's economy slowed unexpectedly in July after Beijing's zero-Covid policy and a property crisis slowed factory and retail activity.


"In our view, problems in the real estate sector, plus the government's zero-Covid strategy, are likely to continue to weigh on the economy in the short to medium term, meaning that oil prices will probably face persistent headwinds from this side," Commerzbank said in a note.


China's fuel product exports are expected to rebound in August to their highest in nearly a year after Beijing issued more quotas, adding pressure to already-shrinking refining margins.


Investors also monitored talks to revive the 2015 Iran nuclear deal. More oil could enter the market if Iran and the United States accept an offer from the European Union, which would remove sanctions on Iranian oil exports, analysts said.


Iran responded to the European Union's "final" draft text to save a 2015 nuclear deal on Monday, an EU official said, but provided no details. The Iranian foreign minister called on the United States to show flexibility to resolve three remaining issues.


Barclays lowered its Brent price forecasts on Tuesday by $8 per barrel for this year and next, as it expects a large surplus of crude oil over the near-term due to "resilient" Russian supplies.


In the United States, output in the major US shale oil basins will rise to 9.049 million barrels per day (bpd) in September, the highest since March 2020, the US Energy Information Administration (EIA) said in a report on Monday. In the Permian, the biggest US shale oil basin, output will hit a record 5.408 million bpd, it said. Market participants awaited industry data on US crude stockpiles expected later on Tuesday. Oil and gasoline stockpiles likely fell last week, while distillate inventories rose, a preliminary Reuters poll showed on Monday. — Reuters


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