Oil futures edged lower early Tuesday, pulling back from 2023 highs, after downbeat economic data from China raised worries about global demand.
Price action
-
West Texas Intermediate crude
CL00,
+2.00%
for October delivery
CL.1,
+2.00% CLV23,
+2.00%
fell 29 cents, or 0.3%, to $85.26 a barrel on the New York Mercantile Exchange. WTI, the U.S. benchmark, didn’t close Monday due to the Labor Day holiday. -
November Brent crude
BRN00,
+1.49% BRNX23,
+1.49% ,
the global benchmark, was off 70 cents, or 0.8%, at $88.30 a barrel on ICE Futures Europe.
Market drivers
WTI jumped more than 7% last week, while Brent advanced 5.5%, with both benchmarks ending Friday at their highest since November. Brent added to its rise in London trade Monday.
Crude prices more than recovered from an early August swoon as the market focus turned back to tightening supplies, enhanced by expectations Saudi Arabia will extend a production cut of 1 million barrels a day through October. Oil prices saw some pressure on Tuesday though after downbeat news from the world’s second-largest economy.
A Caixin survey showed China’s services sector expanded in August at its slowest pace in eight months, providing further evidence that the country’s post-pandemic recovery was faltering.
Also souring the tone, a eurozone survey showed output in the bloc contracted at its fastest pace in nearly three years last month.
Analysts said the backdrop for crude remains constructive though. Futures for Brent and WTI have moved into backwardation, meaning that front-dated contracts are priced higher than deferred contracts, underlining tightness in the physical market for crude.
Meanwhile, the oil market “is waiting and expecting Saudi Arabia to extend its additional voluntary supply cut, while Russia is also expected to extend its cuts,” said Warren Patterson and Ewa Manthey, commodities strategists at ING, in a note. “Given market expectations, it is unlikely that the two producers would stray away from an extension and so risk a selloff in the market.”
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