Oil retreats after China cut key interest rates less than expected

Oil prices fell on Tuesday after China cut its benchmark lending rates less than expected, raising further concerns about the outlook for oil demand in the world’s largest crude importer.

Brent crude fell five cents to $76.04 a barrel at 0310 GMT. US West Texas Intermediate crude for July delivery fell 99 cents from Friday’s close at $70.79. The July contract expires at the close of trading on Tuesday.

The US crude contract for August delivery, the most active, also fell 71 cents from Friday’s closing, to $71.22 a barrel. There was no settlement of US crude on Monday due to a public holiday in the United States.

Earlier on Tuesday, China cut two benchmark lending rates – the key rate for one-year and five-year loans – by 10 basis points each. The cut, the first in 10 months, was less severe than expected, with 50 percent of respondents polled by Reuters expecting a 15 basis point cut in the five-year lending rate.

The downgrade came after recent economic data showed that the retail and factory sectors were struggling to maintain the momentum achieved earlier in the year.

The Chinese government met last week to discuss measures to stimulate economic growth, and several major banks cut their economic growth forecasts for 2023 amid fears that the post-COVID-19 recovery might falter.

On the supply front, Iran’s crude oil exports and oil production hit new highs in 2023, despite US sanctions.

Russia is set to increase exports of seaborne diesel and gasoil this month, outpacing cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Moscow itself.

JPMorgan cut its average Brent crude price estimate to $81 a barrel this year from a previous forecast of $90.

The bank’s analysts said that the OPEC + cuts are not enough to balance global supply and demand, even if they are extended until 2024.