Brent declines further on China's slow economic recovery and US rate hike fears

The front-month ICE Brent contract has lost $1.24/bbl on the day, to trade at $83.58/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Crude oil supply cuts pledged by oil giants like Saudi Arabia and Russia have provided some support to Brent futures in recent weeks.

Saudi Arabia’s crude oil export dropped to a three-year low of 6.80 million b/d in June, reported the Joint Organisations Data Initiative (JODI) on Wednesday. Saudi crude output was also at a three-year low, after it fell by 300,000 b/d on the month to 9.96 million b/d.

Saudi Arabia and the broader OPEC+’ group's primary goal is to put a floor under oil prices and bring a “balance in the market” with these supply reductions that came into effect from May.

Downward pressure:

Fresh fears of yet another US interest rate hike have weighed down on Brent futures. At a Federal Open Market Committee (FOMC) meeting in July, a US Federal Reserve (Fed) officials said the central bank's priority is to “battle inflation”.

“Oil traders are getting that sinking feeling as pressure builds against the backdrop of the Fed that may have little alternative to turn up the Fed Funds screws to throw a wet blanket over the red-hot US economy,” commented SPI Asset Management’s analyst Stephen Innes.

Ongoing concerns about China’s slower-than-expected economic recovery have put a lid on Brent price gains.

"Crude prices are going to struggle here as we have bearish sentiment in the world's two largest economies," said Ed Moya, OANDA’s senior market analyst.

“The Chinese economy can best be described as a high-speed bullet train wreck colliding with an economic dumpster fire,” Stephen Innes said.

By Aparupa Mazumder

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