Oil prices slipped on Tuesday as fresh services data added to gloom over the state of the global economy, particularly China’s stuttering post-pandemic recovery, although expectations of an extension in supply cuts by leading OPEC+ producers limited losses.
By 1218 GMT, Brent crude futures for November were down 68 cents at $88.32 a barrel, while U.S. West Texas Intermediate crude (WTI) October futures edged 31 cents lower to $85.24 a barrel.
Global business activity largely slowed last month as services firms struggled in the face of weak demand due to rising prices and borrowing costs making indebted consumers rein in spending, surveys showed on Tuesday.
China, the world’s second-largest economy, is considered crucial to shoring up oil demand over the rest of the year. Its sluggish economic activity has frustrated markets as pledged stimulus has fallen short of expectations.
A survey showed China’s services activity expanded at the slowest pace in eight months in August as weak demand continued to dog the world’s biggest oil importer.
The U.S. dollar climbed as a result, hitting a more than three-month high, making oil more expensive for holders of other currencies, denting demand.
In the euro zone, the picture was gloomier than initially thought as the bloc’s dominant services industry fell into contraction territory, suggesting the bloc could slide into recession.
Germany’s services sector contracted for the first time this year and France’s shrank more than estimated.
In Britain – outside the European Union – a survey showed the sharpest business slowdown in seven months.
Eyes are also on U.S. economic data expected later on Tuesday for clues on whether the Federal Reserve will end its aggressive interest rate hike campaign.
Saudi Arabia is widely expected to extend voluntary oil cuts into October and Russia will unveil a new OPEC+ supply cut deal this week, according to its deputy prime minister.
Moscow has already announced it will cut exports by 300,000 barrels per day (bpd) in September, following a 500,000 bpd cut in August. Riyadh is also expected to roll over a voluntary 1 million bpd cut into October.
“Given market expectations, it is unlikely that the two producers would stray away from an extension and so risk a sell-off in the market,” ING analysts said.
Source: Reuters