Oil Traders Flip-Flop on China While Iran Is Cited as Upcoming Influence

Meanwhile, Russia's refineries are running full-steam: File Image/Pixabay

No sooner did oil traders boost prices last Friday due to renewed optimism over China's economy than they began this week suddenly pessimistic about its economic growth – and crude on Monday fell as a result, albeit minimally.

Brent settled down 48 cents, or 0.6 percent, to $76.13 per barrel while West Texas Intermediate was down 49 cents, or 0.7 percent, to $71.29 at 19:35 GMT.

While Friday's optimism was due to China's refinery throughput rising in May to its second-highest total on record, Monday's pessimism was triggered by banks cutting their forecasts for the country's 2023 growth in gross domestic product, after May data last week showed its post-lockdown recovery to be faltering.

Nomura cut its forecast to 5.1 percent from 5.5 percent, following similar downgrades by UBS, Standard Chartered, Bank of America, and JPMorgan.

The banks expect China's GDP growth to be between 5.1 percent and 5.7 percent this year, down from 5.5 percent to 6.3 percent.

Jorge Leon, senior vice president at Rystad Energy, said, "Much will depend on China's economic performance in the second half of this year and the effectiveness of the country's recently announced stimulus measures, and on the ability of the U.S. and Europe to avoid an economic slowdown amid interest rates hikes."

In other oil related news on Monday, a person familiar with the matter told Bloomberg that Russia's refining facilities processed 5.49 million barrels per day (bpd) in the week ending June 14, nearly 194,000 bpd more than the week before and the country's highest processing rate since the second half of April.

Viktor Katona, head of oil analytics at Kpler, explained, "Russia is restoring its daily refinery throughput as the spring maintenance season is largely over; we will see the last key facilities, including Surgutneftegas PJSC's Kirishi, coming back online in the first days of July, then the refinery runs will fully return to pre-maintenance volumes."

Meanwhile, Zain Vawda, analyst at DailyFX, warned of circumstances that could impact trading in the days ahead.

He wrote of the ongoing negotiations between the U.S. and Iran, "There has been little in the way of concrete feedback regarding the talks with market participants weary of the potential for increased oil supply should a positive deal be reached.

"Whether or not this is even a part of the current discourse is unclear but remains a key area of interest and could pose risks to oil prices."