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Oil prices dipped on Monday, as weak economic data from China weighed on market sentiment. However, the losses were limited by the gains from the previous week and expectations of a potential U.S.-China trade deal that could support global economic growth and drive fuel demand higher.
As of 0644 GMT, Brent crude futures fell 18 cents, or 0.27%, settling at $66.29 per barrel, while U.S. West Texas Intermediate (WTI) crude lost 15 cents, or 0.23%, to reach $64.43.
China’s latest economic figures painted a somber picture. Exports growth in May dropped to a three-month low, largely due to the ongoing impact of U.S. tariffs on Chinese shipments. Additionally, factory-gate deflation deepened to its worst level in two years, adding more pressure to the world’s second-largest economy.
A key data point revealed that China’s crude oil imports declined in May, marking the lowest daily rate in four months. The reduction was attributed to widespread planned maintenance across both state-owned and independent refiners.
Despite the weaker data, oil prices had a strong week prior, with Brent rising by 4% and WTI increasing by 6.2%. The gains were driven by the optimism surrounding the potential for a U.S.-China trade agreement, which helped boost risk appetite among investors. Furthermore, a U.S. jobs report showing a steady unemployment rate in May heightened expectations of a possible interest rate cut by the Federal Reserve, further supporting the rally.
While concerns about increased OPEC+ supply remain, particularly after the group’s announcement of a significant output hike for July, the possibility of a trade deal that could stimulate economic growth and oil demand outweighed these risks. HSBC anticipates that OPEC+ will accelerate production hikes in the coming months, which could pose downside risks to its $65-per-barrel Brent forecast for the fourth quarter of 2025. Capital Economics also suggests that this “faster pace” of OPEC+ output increases is likely to persist.
WTI’s discount to Brent has been narrowing recently, attributed to a combination of increased OPEC+ production, modest growth in U.S. crude oil supply, and potential output declines expected next year. As ING analysts led by Warren Patterson noted, these factors have contributed to a tightening of the price differential.
In the U.S., supply concerns were amplified by wildfires in Canada, which disrupted production, and by strong demand for gasoline during the summer driving season. The number of operating U.S. oil rigs, an early indicator of future output, fell by nine to 442 last week, according to Baker Hughes.
In conclusion, while oil prices are facing pressure from weak China data, the ongoing U.S.-China trade talks and the potential for stronger demand offer a glimmer of hope for market participants. However, the balance of risks remains, with OPEC+ production hikes and global economic uncertainties continuing to shape the outlook for oil prices.
