Oil Falls as China’s Stimulus Seen Insufficient to Spur Demand

Oil fell as China’s plans to support its economy were seen as insufficient to reignite demand.

(Bloomberg) — Oil fell as China’s plans to support its economy were seen as insufficient to reignite demand.

China cut interest rates last week and hinted that further economic support would be delivered. The world’s two largest economies also said their relations took a positive step forward after US Secretary of State Antony Blinken’s trip to Beijing. While last week’s developments lifted Brent and West Texas Intermediate futures, those gains faded on Monday. 

“There is some encouragement, but I think the market is deciding for the oil market to tighten up materially, we are going to have to see more,” Bart Melek, global head of commodity strategy at TD Securities, said by phone.

Still, there have been steady gains for gasoline and diesel prices as a spate of refinery outages ramp up premiums for the fuels. That’s also helping to boost demand for some Middle Eastern crudes. Crude trading volumes, especially for WTI, may be lower than usual on Monday as the US marks the Juneteenth holiday.

Oil has retreated in the first half of the year as China’s lifting of its Covid Zero restrictions underwhelmed lofty expectations, while global supplies, including from Russia, remained abundant. In a bid to stem the slide, the Organization of Petroleum Exporting Countries and its allies have announced production cuts, including a voluntary reduction from Saudi Arabia of 1 million barrels a day in July.

Iraq and Turkey were set to meet Monday to discuss reopening a nearly 500,000 barrel-a-day pipeline that was shut in March.

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(An earlier version of this story corrected a reference to the market’s pricing structure.)

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