The euro zone’s debt crisis and weak Chinese data reinforced concern about petroleum demand, while disappointment about talks between Iran and the UN nuclear agency limited losses.
Data released yesterday implied that China’s economy is struggling domestically, as prices, output and sales at home were down. Annual economic growth is widely expected to dip below 8% in 2Q, a sixth consecutive quarter of slowdown.
Trade data showed exports rose over 15% in May, which was much stronger than expected. Trade with the US rose 12% in the first five months of this year, compared with a 1.3% rise in trade with Europe.
Chinese oil imports were record high in May, but implied oil demand was up only 0.4% after a decline in April. Diesel sales are down as industrial fuel consumption declined.
The cut in interest rates along with the government’s speeding up of some infrastructure investments have reduced fears of an economic hard-landing in China. Analysts expect domestic demand to recover late in 3Q.
Saudi Arabia cut oil output in May by 0.3 mbd to 9.8 mbd. Its oil production was at its highest for more than 30 years in April, to meet growing demand and attempt to curb oil prices. OPEC will meet Thursday in Vienna to review output policy.
Weak demand outlook keeps a ceiling on gas prices
UK gas demand in May was 218 mcm/day, a drop of 9% from a year earlier. Year-to-date demand is down by around 8% compared to last year.
The euro zone economy is likely to shrink in the current quarter. The May composite PMI for manufacturing and services is below the neutral level of 50, suggesting the steepest contraction in activity in both sectors in three years.
A 15-day maintenance of the UK Interconnector pipeline will start this week, which may cause a disconnect in prices between the Continent and UK.
NBP Day-ahead price, p/th (Source: Reuters)