Oil prices fell on Monday amid worries about economic growth prospects in China, the world’s largest crude importer.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.59 per cent lower at $76.16 a barrel at 12.06pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was down 0.74 per cent at $71.25 a barrel.
Both benchmarks were down more than 1 per cent in the morning.
“Traders are focused on Chinese growth and every day there is more pessimism among traders about the Chinese post-Covid demand,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
“Wall Street banks are busy cutting their forecasts and admitting that their numbers are wrong, and the time has come to face reality."
Goldman Sachs has become the latest to lower its economic growth forecast for the world’s second-largest economy.
The US investment bank now expects China’s gross domestic product to grow at 5.4 per cent this year, from 6 per cent earlier, according to reports.
It also reduced its 2024 growth forecast to 4.5 per cent, from 4.6 per cent.
China is aiming for GDP growth of 5 per cent in 2023, which is lower than its last year's growth estimate of 5.5 per cent.
“It is important to emphasise here that the [People's Bank of China] is less concerned about inflation-related issues and is more focused on growth,” Mr Aslam said.
“The central bank and lawmakers are fully focused on reviving growth, and a large number of policies have been put in place to support growth, while others are in the pipeline,” he said.
Last week, oil prices posted a weekly gain as a surge in Chinese refining activity reassured traders that domestic fuel consumption was growing in the country.
China’s central bank also cut a key short-term lending rate for the first time in 10 months after disappointing economic data.
The People’s Bank of China lowered its seven-day reverse repo rate by 10 basis points to 1.9 per cent, from 2 per cent, as part of efforts to support economic growth.
“One should be careful if they are less optimistic about China as, after all, China is a giant that can move the economic ship in one direction by itself,” Mr Aslam said.
Both the International Energy Agency and Opec expect the oil market to tighten in the second half of the year on rising Asian crude demand and Opec+ production cuts.
However, several banks and energy consultancies have recently reduced their oil price expectations for the year, citing an increase in crude supplies from Russia and other countries facing economic sanctions.
On Thursday, Moody’s Analytics lowered its crude oil price forecast by $4 a barrel for the second and third quarters of 2023.
“It has become clear that Russia will be able to evade and bypass the massive oil sanctions levied upon them by western powers for its invasion of Ukraine,” the market intelligence company said.
Moody’s still expects western sanctions and the EU’s oil import ban to restrain Russian exports.
“That has not happened, however, and if it has not happened yet, it might not happen at all,” it said.
Switzerland's largest bank UBS also slashed its September and December oil price forecasts by $5 a barrel each.
“Despite the solid demand recovery, global visible oil inventories did not fall in the first four months of this year because supply growth was also solid,” UBS strategists said.
The Swiss lender also bumped up its US supply forecast by 200,000 barrels per day after the US Energy Information Administration projected record high production in the country for this year and the next.
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