Oil falls as China demand concerns fuel recession fears

  • Brent and WTI fall $1 from 5-week highs
  • OPEC+’s decision on major supply restraints has pushed prices higher
  • Contracts in the Chinese service sector for the first time in months

LONDON, Oct 10 (Reuters) – Oil prices fell on Monday, ending five straight days of gains as investors eyed a slowing in economic activity in China, the world’s largest crude oil importer, raising concerns of a global recession and a falling global fuel demand revived.

Brent crude futures for December settlement fell as much as 1.1% and was last down 77 cents, or 0.8%, to $97.15 a barrel by 0645 GMT.

West Texas Intermediate crude for November delivery fell as much as 1.1% to last at $92 a barrel, down 64 cents, or 0.7%.

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Services activity in China fell for the first time in four months in September as COVID-19 restrictions hit demand and business confidence, data showed on Saturday. Continue reading

The slowing economy in China, the world’s second largest oil consumer after the United States, is adding to growing concerns about a possible global recession, prompted by numerous central banks raising interest rates to combat high inflation.

“Oil…is being hit by the triple hit of China’s economic weakness, US monetary policy tightening and the Biden administration’s SPR intervention,” Stephen Innes, managing director at SPI Asset Management, said in a note.

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Innes was referring to the possibility of additional releases from the US Strategic Petroleum Reserve next month in response to the decision by the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, last week to cut its production target by 2 million barrels per Day. Continue reading

Brent and WTI posted their biggest weekly percentage gains since March after the cut was announced.

OPEC+ cuts, which precede a European Union embargo on Russian oil, will pressure supply in an already tight market. EU sanctions against Russian crude oil and oil products come into effect in December and February respectively.

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“The cut is clearly bullish,” ING analysts said in a note.

“However, there are obviously many other uncertainties in the market, including the development of Russian oil supply due to the EU oil ban and the G7 price cap, and the demand outlook given the deteriorating macro picture.”

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Additional reporting by Florence Tan and Emily Chow; Edited by Jacqueline Wong, Christian Schmollinger and Louise Heavens

Our standards: The Thomson Reuters Trust Principles.

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