Oil slips after glum data from China

London — Oil prices dipped on Tuesday as new data added to gloom over the state of China’s post-pandemic recovery, although expectations of an extension in supply cuts by leading Opec+ members limited losses.

By 7.54am GMT, Brent crude futures for November were down 65c at $88.35 a barrel, while US West Texas Intermediate crude (WTI) October futures edged 17c lower to $85.38 a barrel.

China, the world’s second-largest economy, is considered crucial to shoring up oil demand over the rest of 2023. Its sluggish economic activity has frustrated markets as pledged stimulus has fallen short of expectations.

A private-sector survey on Tuesday showed that China’s services activity expanded at the slowest pace in eight months in August as weak demand continued to dog the world's biggest oil importer.

Analysts said the markets had priced in China’s recent effort to boost the economy, offsetting support from expected oil supply cuts.

Meanwhile, data from Europe was also grim. The decline in eurozone business activity accelerated faster than initially thought in August as the bloc’s dominant services industry contracted, according to a survey which suggests the bloc could drop into recession.

Saudi Arabia is widely expected to extend voluntary oil cuts into October and Russia will unveil a new Opec+ supply cut deal this week, according to its deputy prime minister.

Moscow has already announced it will cut exports by 300,000 barrels per day (bpd) in September, following a 500,000 bpd cut in August. Riyadh is also expected to roll over a voluntary 1-million bpd cut into October.

“Given market expectations, it is unlikely that the two producers would stray away from an extension and so risk a sell-off in the market,” analysts from ING said in a client note.

In Japan, the world’s third-biggest economy, household spending in July fell 5.0% from a year earlier, deeper than a forecast decline of 2.5% and continuing into a fifth month of falls. 

Reuters