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Oil drops on China output rise, weaker U.S. demand

oil prices

Global benchmark Brent crude futures for August delivery were down 40 cents, or 0.5%, at $82.22 per barrel

Oil prices slid in Asian trading on Monday after a survey on Friday showed weaker U.S. consumer demand and as May crude production increased in China, the world’s biggest crude importer.

Global benchmark Brent crude futures for August delivery were down 40 cents, or 0.5%, at $82.22 per barrel at 0631 GMT. U.S. WTI crude futures for July delivery dropped 36 cents to $78.09 a barrel.

The more-active August delivery WTI contract slid 0.5% to $77.7 per barrel.

That followed prices sliding on Friday after a survey showed U.S. consumer sentiment dropped to a seven-month low in June, with households concerned about their personal finances and inflation.

However, both benchmark contracts still advanced around 4% last week, the highest weekly rise in percentage terms since April, on signs of stronger fuel demand.

Last week’s robust rally was fuelled by forecasts of strong 2024 demand from OPEC+ and the IEA. Nevertheless, given OPEC’s vested interest in crude oil, there is some scepticism around OPEC’s forecasts, according to Tony Sycamore, a market analyst at IG in Singapore.

Friday’s soft U.S. consumer confidence numbers indicate that the resilience of the American consumer and the U.S. economy will be tested as households run down their savings to combat higher interest rates and cost-of-living pressures, he said.

Meanwhile, China’s May domestic crude oil production increased 0.6% on year to 18.15 million tons, as per data released by the National Bureau of Statistics on Monday.

Year-to-date (YTD) output was 89.1 million tons, 1.8% higher from a year earlier. National crude oil throughput dropped 1.8% in May over the same year-ago level to 60.52 million tons, with YTD totalling 301.77 million tons, up 0.3% from a year ago.

China’s May industrial output lagged expectations and a slowdown in the property sector showed no signs of easing, adding pressure on Beijing to shore up growth.

The flurry of data on Monday was largely downbeat, underscoring a bumpy recovery for the world’s second-biggest economy.

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