Fears of the Chinese economy tend to cut oil’s 7-week series of gains

Oil is set to end the week lower after a seven-week winning streak, as worries about China’s economy outweigh indicators of tight supply.

The seven-week price rally, driven by supply cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC +), was the longest streak of gains for both benchmarks this year.

Brent crude futures rose about 18 percent, and WTI crude rose more than 20 percent in the seven weeks to Aug. 11, as prices climbed to their highest levels in months.

Both benchmarks pared some gains this week, falling more than 3 percent.

There was little change in their prices on Friday, as Brent crude fell 21 cents to $83.91 a barrel by 1033 GMT, and West Texas Intermediate crude fell nine cents to $80.3 a barrel.

China, the world’s largest importer, is seen as key to supporting oil demand through the rest of the year.

But China’s recovery after the COVID-19 pandemic has been slow due to weak domestic consumption and faltering factory activity and the real estate sector, raising concerns that Beijing will not achieve its five percent annual growth target without major stimulus measures.

Data showed that US crude oil stocks fell by about six million barrels last week, due to increased exports and refinery operating rates. The weekly volume of products supplied, an indicator of demand, rose to its highest level since December.

China also withdrew crude oil stocks in July, which is a rare occurrence and for the first time in 33 months.

Another factor affecting prices is the concern that the Federal Reserve will continue to raise interest rates to control inflation. Higher borrowing costs may impede economic growth and thus reduce total demand for oil.