Oil prices fell as signs of macroeconomic weakness — particularly in China, the largest importer — overshadowed an expected extension of OPEC+ production cuts.
Global benchmark Brent crude approached $83 a barrel after falling 0.9% on Monday, while West Texas Intermediate crude traded below $79. Broader markets remained subdued ahead of U.S. jobs data and comments from Federal Reserve officials, with the outlook for China’s economy bleak.
Crude oil has been on a gradual rise, with Brent up about 7% this year, supported by tensions in the Middle East and supply curbs by the OPEC+ alliance. The optimism has been tempered by strong production from outside the alliance, a fragile demand outlook in China and reduced expectations of when central banks will start easing.
“The market has been moving higher in recent weeks as fundamentals improve,” Daniel Hynes and Brian Martin, analysts at ANZ Group Holdings Ltd, said in a note. While tensions in the Middle East have yet to directly impact supply, disruptions in the Red Sea have extended the lead time for oil to reach the market, they added.
Negotiations for a ceasefire in the war between Israel and Hamas remain stalled. Meanwhile, another container ship, the MSC Sky II, was attacked in the Red Sea by Yemen-based Houthi rebels.
OPEC and its allies on Sunday extended their production cuts of about 2 million barrels per day until the end of June, in a widely expected move. The OPEC Secretariat said the alliance’s cuts would be gradually rolled back depending on market conditions after that.
China will set its economic growth target at around 5% this year, according to a copy of the government’s annual work report seen by Bloomberg News, raising expectations that officials will unleash more stimulus as they try to boost confidence in the slowing economy. China also set a more ambitious target for cutting the energy consumption needed to power economic growth, or reducing energy intensity, this year.
