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(Bloomberg) — Oil fell as investors awaited more details on how China aims to prop up its economy during the second half of the year, tracking lower commodity prices as the week began.
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West Texas Intermediate fell below $71 a barrel after rising more than 2% last week as China cut interest rates and hinted that more support may be offered. Also in focus for investors was the second day of US Secretary of State Antony Blinken’s visit to Beijing after a positive start to the trip.
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Trading volumes for crude oil, especially for WTI, may be lower than usual on Monday as the US celebrates the June holidays. Among the major market metrics, the US Crude Spot Spread remains flat in contango, a bearish pricing pattern that indicates oversupply in the near term.
Oil slumped in the first half of the year as China recovered from Covid-19, and global supplies remained ample, including from Russia. In an effort to stem the slide, the Organization of the Petroleum Exporting Countries and its allies announced supply cuts, including a voluntary cut by Saudi Arabia of 1 million barrels per day, which will start from July.
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“Prices are still locked within the consolidation pattern,” said Yeap Jun Rong, market strategist at IG Asia Pte. He said the worst economic conditions are yet to be seen, which could keep prices lower for longer.
While local Chinese media is awash with reports that more economic support will be imminent, details are still scarce. Goldman Sachs Group Inc. has become The latest bank to lower its forecasts for the Chinese economy, citing limited options for increasing stimulus, according to a research report on Sunday.
Both OPEC and the Paris-based International Energy Agency, which advises rich countries, predicted that the crude oil market would narrow significantly in the second half. However, crude oil inventories at the main hub in Cushing, Oklahoma, swelled to a two-year high.
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(An earlier version of this story corrected a reference to the market’s pricing structure.)
