Oil Prices Rise on Summer Demand Hopes Despite Weak Chinese Data
Oil prices edged higher on Monday as hopes for increased demand from the summer driving season in the northern hemisphere offset disappointing Chinese economic data, highlighting a bumpy recovery for the world’s largest crude importer.
Despite retail sales beating forecasts due to a holiday boost, most of Monday’s Chinese data was lackluster. This followed a survey on Friday showing U.S. consumer sentiment fell to a seven-month low in June.
Global benchmark Brent crude futures rose 33 cents, or 0.4%, to $82.95 a barrel by 1212 GMT. U.S. West Texas Intermediate crude futures gained 25 cents, or 0.3%, to $78.70.
Last week, both benchmarks recorded their first weekly gain in four weeks, buoyed by confidence that oil inventories are set to decrease as the summer season begins in the northern hemisphere, coupled with ongoing OPEC+ supply cuts.
“The crude oil market initially responded negatively to mixed data from China,” said Ole Hansen of Saxo Bank. “But the outlook for strong fuel demand in the coming quarter and Saudi reassurances about the potential October production hike being contingent on prevailing conditions, along with a focus on bringing quota-breakers in line, all seem to be supportive.”
Saudi Arabia has indicated that OPEC+’s planned fourth-quarter output increase can be paused or reversed if necessary. Last week, Russia and Iraq, which have been exceeding their OPEC+ quotas, pledged to meet their production obligations.
Reports from OPEC and the International Energy Agency last week, though differing on the strength of oil demand growth this year, bolstered confidence that inventories would decline in the second half.
However, BofA analysts warned in a report that while the market consensus is for higher oil prices in the third quarter, there is a risk if weak supply and demand balances persist.
“It is not yet clear whether balances will firm enough in the third quarter to tip the market from a large apparent surplus into a deficit that can lift prices,” wrote BofA analysts including Francisco Blanch.
On the geopolitical front, concerns of a wider Middle East conflict remained after the Israeli military warned on Sunday that intensified cross-border fire from Lebanon’s Hezbollah movement into Israel could trigger serious escalation.
