By Myra P. Saefong and William Watts
Oil futures finished lower on Friday, contributing to a loss for the week as subdued China data fed concerns over the outlook for energy demand.
Prices have failed to find much support in the wake of Saudi Arabia’s decision last weekend to voluntarily cut more of its oil production in July.
West Texas Intermediate crude for July delivery /zigman2/quotes/209723049/delayed CL00 +0.24% /zigman2/quotes/211629951/delayed CL.1 +0.24% /zigman2/quotes/209725418/delayed CLN23 +0.24% fell $1.12, or 1.6%, to settle at $70.17 a barrel on the New York Mercantile Exchange, leaving front-month prices for the U.S. benchmark down 2.2% for the week, FactSet data show.
August Brent crude , the global benchmark, lost $1.17, or 1.5%, at $74.79 a barrel on ICE Futures Europe, for a weekly loss of 1.8%,
Back on Nymex, July gasoline /zigman2/quotes/215376520/delayed RBN23 +0.15% declined by nearly 0.8% to $2.59 a gallon, with prices up 3.7% for the week, while July heating oil /zigman2/quotes/215376439/delayed HON23 +0.14% fell 1.2% at $2.36 a gallon, paring the weekly rise to 0.2%.
July natural gas /zigman2/quotes/210191117/delayed NGN23 +0.35% fell 4.2% to $2.25 per million British thermal units, trimming its weekly advance to 3.8%.
Oil prices had started the week higher after Saudi Arabia last Sunday announced it would voluntarily cut production by an additional 1 million barrels a day in July, with the option to extend the reduction, while the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, agreed to extend previously agreed cuts through 2024.
Also see: EIA predicts record-high 2023 and 2024 U.S. oil output
However, traders “faded the move” up, as the Saudi cut would only remove one-third of a single day’s worth of global oil production over the course of July, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. That will “not meaningfully impact supply and demand dynamics.”
A Platts survey by S&P Global Commodity Insights released Friday showed that crude output from OPEC+ fell 670,000 barrels per day to 41.33 million barrels a day in the first month of expanded voluntary cuts in May .
However, uncertainty over demand from China continues to limit upside for crude, analysts said. Weaker-than-expected Chinese producer and consumer inflation readings on Friday were seen as a negative.
The country’s producer-price index declined 4.6% from a year earlier in May , compared with the 3.6% decline in April and marking the weakest reading since February 2016. The PPI result was also lower than the 4.3% decline expected by economists polled by The Wall Street Journal.
China’s consumer-price index rose 0.2% from a year earlier in May, up slightly from the 0.1% year-over-year increase in April. Economists had penciled in a 0.3% rise.
“Despite the softer U.S. dollar, the oil price is struggling to gain traction and the latest Chinese data have not helped the cause. The low CPI and PPI prints from China again demonstrate that the global demand outlook for oil is murky at best, which is acting as a constraint on the oil price,” said Tim Waterer, chief market analyst at KCM Trade.
Looking ahead, “more resilient demand readings and a dovish tilt” to Federal Reserve policy expectations could drive oil prices towards the upper end of this year’s trading range in the low $80s,” said Sevens Report’s Richey.
However, “the prospects for new YTD highs are slim given the widely held view that the economy is on the brink of recession,” he said.