(Bloomberg) – Oil fell as investors awaited more details on how China aims to support its economy in the second half of the year, following declines in other commodities at the start of trade in China. week.
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West Texas Intermediate fell below $71 a barrel after climbing more than 2% last week as China cut interest rates and hinted further support could be forthcoming. The second day of US Secretary of State Antony Blinken’s visit to Beijing, after a positive start to the trip, also caught the attention of investors.
Crude trading volumes, particularly for WTI, could be lower than normal on Monday as the United States marks the June 16 holiday. Among key market metrics, the rapid spread of the U.S. crude benchmark remains firmly in contango, a downward price trend that indicates ample near-term supply.
Oil fell in the first half of the year as China’s recovery from Covid Zero was disappointing and global supplies remained plentiful, including from Russia. In a bid to stem the fall, the Organization of the Petroleum Exporting Countries and its allies have announced supply cuts, including a voluntary reduction by Saudi Arabia of 1 million barrels per day that will begin from July.
“Prices continue to be locked in a consolidation pattern,” said Yeap Jun Rong, market strategist for IG Asia Pte. The worst economic conditions have yet to be seen, which could keep prices lower for longer, he said.
While Chinese national media have been inundated with reports that additional economic support is on the way, details remain scarce. Goldman Sachs Group Inc. has become the latest bank to cut its forecast for China’s economy, citing limited options for increasing stimulus, according to a research report released Sunday.
OPEC and the Paris-based International Energy Agency, which advises wealthy countries, expect the crude market to tighten significantly in the second half of the year. Still, crude inventories at the key hub in Cushing, Oklahoma, have hit a two-year high.
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(An earlier version of this story corrected a reference to market price structure.)
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