Oil dropped after a seven-week rally as concerns about China’s economy spurred a shift away from risk assets.
(Bloomberg) — Oil dropped after a seven-week rally as concerns about China’s economy spurred a shift away from risk assets.
West Texas Intermediate fell toward $82 a barrel after the longest run of weekly gains since mid-2022. Equity benchmarks fell as the week’s trading began, hurt by China’s worsening property slump. The dollar rose for a third day, hurting the appeal of commodities priced in the currency.
Crude has risen by about a quarter since its lows in June as OPEC+ linchpins Russia and Saudi Arabia curtailed supply. That’s helped push the market into a deficit of more than 2 million barrels a day this quarter, the producer group has estimated. Rising risks to flows of Russian crude through the Black Sea due to the war in Ukraine have also aided the gains.
At the same time, the outlook in the US has brightened as a growing number of economists — including the Federal Reserve’s own staff — now predict the country will escape a recession, which could buoy energy demand.
“The rally has been too focused on US economic sentiment, ignoring the continuing strong headwinds in Europe and China,” said Vandana Hari, founder of Vanda Insights in Singapore. “A reality check has been overdue.”
A snapshot of conditions in China will come on Tuesday with industrial-production figures, including for the refining industry. The country, the world’s largest crude buyer, has been opening new plants, buoying import demand.
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