(London) Oil prices hesitated on Monday, caught in the heat of slowed industrial production in China, a bad signal for demand for black gold, counterbalanced by the strengthening of expectations of American rate cuts, which on the contrary is pulling up prices to the top.
Around 6:55 a.m. (Eastern time) (12:55 p.m. in Paris), the price of a barrel of North Sea Brent, for delivery in August, fell 0.16% to $82.49.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in July, fell 0.20% to $78.29.
The two crude benchmarks started the session in the green.
But “a new weakness” in black gold prices “is observed this morning due to the weakness of Chinese factory activity,” notes Tamas Varga of PVM Energy.
In China, growth in industrial production actually slowed in May, according to official figures published on Monday, a sign of an uneven recovery in the world’s second largest economy, likely to weigh on oil demand.
In addition, “the weakness of the euro, caused by the progress of French far-right political parties during the European parliamentary elections” and political uncertainties in France, have led to a revival of the dollar, adds the analyst.
However, since black gold prices are denominated in dollars, an appreciation of the American currency discourages oil purchases by reducing the purchasing power of buyers using other currencies.
Separately, the latest report on U.S. inventories from the U.S. Energy Information Administration (EIA) indicated an increase in crude reserves of 3.7 million barrels during the week ended June 7, another factor relaxing classes.
At the same time, this decline is being dampened by economic data from the United States signaling easing inflationary pressures, Mr. Varga notes.
Last week, wholesale prices on the producer side started to fall again in May in the United States, while the latest figures for rising weekly unemployment benefit claims showed a slowdown in the American labor market.
This data reinforces investor confidence in upcoming reductions in US interest rates, which could bring down the greenback.
Prices also benefited marginally from the clarifications of several ministers from OPEC members (the Organization of the Petroleum Exporting Countries and their allies, Editor’s note), saying they were “ready if necessary to suspend or cancel the plan” of the cartel, revealed at the beginning of June, “to gradually lift certain production limitations” of crude, indicate analysts at Deutsche Bank.
Eight OPEC members must in fact gradually end the additional production cuts to which they had voluntarily submitted, extended only until the end of September.
