Oil prices dropped on Friday as investors cashed in on gains of more than 2% from the earlier session on concerns demand may sink amid China’s slowing economic growth, Reuters reported. However, supply cuts agreed last week by major crude oil producers are expected to provide some support.
Brent crude oil futures marked $61.08 per barrel at 0530 GMT, fell 0.6 percent or 37 cents from their last close, while U.S. West Texas Intermediate (WTI) crude futures were down by 0.3 percent or 16 cents at $52.42 per barrel from their settlement.
On Friday, China, the largest crude importer and world’s second largest economy, reported few of its slowest growth in industrial output and retail sales in the recent years, highlighting the risks of the nation’s trade dispute with the U.S.
China’s oil refinery throughput in November fell from the previous month, which was the second-highest month on record. According to Reuters news, it suggested an ease in oil demand, though runs were 2.9 percent higher than last year.
Tony Nunan, Mitsubishi Corp’s oil risk manager said that the market is oversupplied in the short-term until OPEC starts to bestow its cuts. China’s slowing economic growth is definitely a concern, but on the bright side, the demand continues to remain relatively decent, he added.
According to Michael McCarthy, CMC markets’ chief strategist, WTI’s current range may suggest a buildup in market momentum; a move up to $54 or move down to $50 would provide a direction for the coming period. Reuters reported that the strategist is biased towards the upside due to shifts in supply as well as demand scenarios.
Supporting the oil prices, the International Energy Agency said on Thursday that it expected a shortage of oil supply to occur in second quarter of 2019, if members of OPEC and other producers stick to the last week’s deal to reduce output.
As a part of the deal, OPEC leader Saudi Arabia said it plans to cut the output to 10.2 million barrels per day in January. The Paris-based IEA hasn’t changed its 2019 forecast of last month for global oil demand growth at 1.4 million barrels per day, while it estimated growth of 1.3 million barrels per day this year.