In Asian trade at midmorning on Monday, crude oil prices declined as China’s economic recovery continued to disappoint and the U.S. dollar strengthened.
Despite the decline, benchmarks remain significantly higher than they have been for months.
Brent crude was trading barely below $86 per barrel at the time of writing, while West Texas Intermediate was trading above $82 per barrel, finding support at these levels despite bearish signals.
The International Energy Agency also provided support for oil prices, stating in its most recent monthly report that it anticipated even greater costs this year.
The agency also anticipated a significant decline in demand in 2024 due to what it termed economic headwinds.
A slightly larger increase in US producer prices in July boosted Treasury yields amidst expectations that the Federal Reserve is nearing the conclusion of its rate-hiking cycle.
A stronger dollar reduces oil demand by increasing the price of the commodity for consumers holding foreign currencies.
Oil prices may remain range-bound this week due to China’s slow economic recovery and a higher US dollar, but OPEC+ has stated that it will do everything it takes to cut supply and stabilize markets, according to CMC Markets analyst Tina Teng.
Tightening Oil Supply Result Global Stock Drawdown
The IEA acknowledged tightening oil supply due to OPEC+ cuts, which could result in worldwide stock drawdowns of 2.2 million barrels per day in the second half of the year.
This, in consequence, could lead to further higher pricing.
The price difference between first- and second-month Brent remained constant on Monday, reflecting tightened supply, after finishing at 67 cents on Friday, the largest since March.
According to Bloomberg, China will reveal additional crucial statistics this week: on Tuesday, the country will announce industrial production data, including figures for the refining industry.