Oil inches down on stronger dollar and China jitters

Singapore — Oil prices eased on Monday as a stronger dollar and economic concerns in China weighed on fuel demand outlook though Brent held above $90 a barrel, supported by tightening supplies after Saudi Arabia and Russia extended supply cuts.

Brent crude fell 10c, or 0.1%, to $90.55 a barrel by 5.41am GMT (7.41am) while US West Texas Intermediate crude was at $87.09 a barrel, down 42c, or 0.5%.

“Concerns about Chinese economic growth weighed on sentiment across commodities,” ANZ analysts said in a note.

“The move was worsened by a stronger USD, which kept investor appetite low,” they added, referring to the greenback that has risen for eight consecutive weeks.

Oil prices have gained in the past two consecutive weeks with Brent settling at its highest since November on Friday, after Saudi Arabia and Russia announced last week they will extend voluntary supply cuts of a combined 1.3-million barrels per day until the end of the year.

“The impact of Saudi-led Opec+ cuts will be clearer by year-end, especially in November and December, when refineries finish maintenance and increase production,” said Mukesh Sahdev, head of downstream and oil trading at Rystad Energy, estimating that refinery outages will peak at 10-million barrels per day (bpd) in October.

“Refinery maintenance will lower crude demand by 2-2.5 million bpd in September and October, but it will rebound in November and December, partially offsetting the price effects of the cuts.”

The International Energy Agency and Opec are due to release their monthly reports this week, and any sign of strong demand is likely to push oil prices higher, ANZ analysts said.

In the US, producers added an oil rig last week for the first time since June, Baker Hughes said in its weekly report, but the total count was still down 127, or 17%, below this time last year.

WTI is likely in the process of marking out a new higher range at above $83 and below resistance at $93.50 in the weeks ahead, with concerns around demand in China and Europe capping further upside, IG analyst Tony Sycamore said in a note.

Reuters