More Disappointing China Data Disrupts Oil Rally, Prices Down 1.7%

Meanwhile, traders mistake old news for new and briefly propel Brent beyond $80: File Image/Pixabay

China not living up to analytical expectations for economic growth was said to be the driving factor behind oil prices on Monday shedding over 1.5 percent – with the partial resumption of output from Libya also worrying traders.

China's gross domestic product grew 6.3 percent year on year in Q2 2023 compared to expectations of 7.3 percent, and as a result Brent settled down $1.37 or 1.7 percent, at $78.50 per barrel.

West Texas Intermediate settled down $1.27, also 1.7 percent, at $74.15.

Two of three oil fields in Libya resumed production after being halted last week over the abduction of a former finance minister; more than balancing this was oil exports from Russia set to fall by 100,000-200,000 barrels per day (bpd) in August, and U.S. shale production set to fall to nearly 9.40 million bpd next month.

That, combined with pledged output cuts from Saudi Arabia soon taking effect contributed to the consensus that the market overall is tightening, in addition to an oil rally that extended for the last three weeks – which makes Monday's drop somewhat unexplainable, especially considering that accompanying China's economic figures was news that oil demand grew 14 percent last month from a year earlier.

Also, the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency forecast surging demand in the second half of the year, which caused Giovanni Staunovo, strategist at UBS, to remark, "With less supply from OPEC+ during the demand-heavy summer months, we expect larger oil inventory declines to become visible and support oil prices."

On the lighter side of Monday's trading, oilprice.com noted that an error on Reuters' part – in the form of reprinting news dating back to June 4 when it was announced that Saudi Arabia will extend production cuts until the end of 2024 – fooled traders and sent prices up sharply earlier in the session (with Brent briefly breaching the $80 threshold): "But prices have since bounced back to normal levels now that the offending media piece has been removed and a retraction printed."