Oil extends losses as weak China data renew recession fears

New York — Oil prices fell on Tuesday as bleak economic data from top crude buyer China renewed fears of a global recession.

Brent crude futures fell 73c, or 0.8%, to $94.37 a barrel by 3.13am GMT. West Texas Intermediate (WTI) crude futures dipped 44c,  or 0.5%, to $88.97 a barrel.

Oil futures fell about 3% during the previous session.

China’s central bank cut lending rates to revive demand as the economy slowed unexpectedly in July, with factory and retail activity squeezed by Beijing’s zero-Covid policy and a property crisis.

“Commodities prices across the board were under pressure as China’s July economic data painted a more downbeat growth picture than previously expected, which prompted renewed concerns on demand outlook,” Yeap Jun Rong, market strategist from IG Group, wrote in a note.

China’s fuel product exports are expected to rebound in August to near a year high after Beijing issued more quotas, adding pressure to already-cooling refining margins.

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

Iran responded to the EU’s “final” draft text to save a 2015 nuclear deal on Monday, an EU official said, but provided no details on Iran’s response to the text. The Iranian foreign minister called on the US to show flexibility to resolve three remaining issues.

In the US, total output in the major US shale oil basins will rise to 9.049-million barrels a day in September, the highest since March 2020, the US energy information administration said in its productivity report on Monday.

Market participants awaited industry data on US crude stockpiles due later on Tuesday. Oil and fuel stockpiles were likely to have fallen last week, while distillate inventories rose, a preliminary Reuters poll showed on Monday.

The premium for front-month WTI futures over barrels loading in six months stood at $3.46 a barrel on Tuesday, the lowest level in four months, suggesting easing tightness in prompt supplies.

Reuters