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Oil Prices Decline Over 1% as Weaker Chinese GDP Raises Demand Concerns

Oil prices experienced a decline of over 1% on Monday due to concerns about the strength of demand in the world’s second-largest oil consumer, China, following weaker-than-expected economic growth. China’s gross domestic product (GDP) grew by 6.3% year-on-year in the second quarter, falling short of analyst forecasts of 7.3%, indicating a loss of momentum in its post-pandemic recovery.

“The GDP figures below expectations are unlikely to alleviate concerns regarding the Chinese economy,” stated Warren Patterson, ING’s head of commodities research.

By 12 p.m. ET (1600 GMT), Brent crude dropped by $1.11 or 1.4%, settling at $78.78 per barrel, while U.S. West Texas Intermediate crude experienced a decline of $1.06 or 1.4%, reaching $74.35 per barrel, marking the second consecutive day of losses for both contracts.

Dennis Kissler, senior vice president of trading at BOK Financial, explained that hedge fund buying has slowed down due to the perception that demand may have been overestimated following the disappointing Chinese economic data.

Oil prices briefly saw a surge after a Reuters news alert suggesting Saudi Arabia’s extension of a voluntary output cut; however, the alert was subsequently retracted as it repeated news published on June 4.

Furthermore, oil prices faced additional pressure on Monday due to the resumption of output at two out of three Libyan fields that were shut down the previous week. The halt in output was a result of protests against the abduction of a former finance minister.

In a separate indication of tightening supplies, sources revealed that Russian oil exports from western ports are anticipated to decrease by 100,000-200,000 barrels per day (bpd) next month. This signifies that Moscow is following through on its commitment to reduce supplies in coordination with Saudi Arabia.

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