Oil Drops as China Concern and Inventory Estimate Hurt Outlook
Some investment banks trim China GDP forecasts after weak data
WTI futures fall toward $70 a barrel after losing 0.4% Tuesday
Oil fell for a second day as traders weighed the outlook for demand in China and a US industry report pointed to a build in stockpiles, with crude joining a broad move lower among commodities including copper.
West Texas Intermediate dropped toward $70 a barrel after losing 0.4% on Tuesday. Some banks cut forecasts for China’s growth this year after weak April data, although the International Energy Agency remains upbeat on the Asian nation’s demand prospects following the end of Covid curbs.
The industry-funded American Petroleum Institute reported nationwide crude inventories rose by 3.7 million barrels last week, as stockpiles built at the key hub at Cushing, Oklahoma, according to people familiar with the figures. Still, the breakdown also showed countrywide gasoline and distillate holdings fell.
Crude is down about 12% this year as China’s slower-than-expected recovery, a campaign of aggressive monetary tightening from the Federal Reserve, and more recent concerns over the US debt ceiling weigh on the outlook. Still, US retail sales rose in April, suggesting that consumer spending in the world’s biggest economy is holding up in the face of economic headwinds.
China’s poor manufacturing performance “may impede, if not chronically impair, prospects of restoration to pre-Covid strength,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. in Singapore. It should not be “dismissed as a passing headwind,” he added.
Oil’s retreat on Wednesday came as other raw materials fell, with key industrial metal copper also edging lower.
Key events this week:
- Eurozone CPI, Wednesday
- BOE Governor Andrew Bailey delivers keynote speech, Wednesday
- US housing starts, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday