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Oil dips over 1.5% on demand fears after weak Chinese data

Published 17/07/2023, 02:03
© Reuters. FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S. February 11, 2019. REUTERS/Nick Oxford//File Photo

By Arathy Somasekhar

HOUSTON (Reuters) -Oil dropped by more than 1.5% on Monday after weaker than expected Chinese economic growth raised doubts over the strength of demand in the world's second biggest oil consumer, and a partial restart of halted Libyan output also pressured prices.

China's gross domestic product (GDP) grew 6.3% year-on-year in the second quarter, compared with analyst forecasts of 7.3%, as its post-pandemic recovery lost momentum.

"The GDP came in below expectations, so will do little to ease concerns over the Chinese economy," said Warren Patterson, ING's head of commodities research.

Brent crude settled down $1.37 or 1.7%, at $78.50 a barrel and U.S. West Texas Intermediate crude closed $1.27, or 1.7%, lower at $74.15 on a second straight day of losses for both contracts.

Hedge fund buying has slowed as a result of ideas that demand could have been overstated after the weak numbers from China, said Dennis Kissler, senior vice president of trading at BOK Financial.

Oil briefly rose after a Reuters news alert on Saudi Arabia extending a voluntary output cut. The alert was subsequently withdrawn because it repeated news published on June 4.

Oil also came under pressure on Monday from the resumption of output at two of three Libyan fields shut last week. Output had been halted by a protest against the abduction of a former finance minister.

© Reuters. FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S. February 11, 2019. REUTERS/Nick Oxford//File Photo

Meanwhile, Russian oil exports from western ports are set to fall by 100,000-200,000 barrels per day (bpd) next month, a sign that Moscow is making good on a pledge for supply cuts in tandem with Saudi Arabia, two sources said on Friday.

U.S. shale oil production is also set to fall to nearly 9.40 million bpd in August, which would be the first monthly decline since December 2022, data from the Energy Information Administration showed on Monday.

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