Oil Extends Losses as Gloomy Growth Outlook in Major Economies Fuels Demand Fears

Friday’s Asian trade saw oil prices fall further on concerns that a gloomy outlook for growth in major economies will dampen demand this year.    

As of 11.38 A.M. Bangkok time, Brent oil futures fell 0.70% to $75.43 a barrel, while West Texas Intermediate crude futures fell 0.76% to $70.75 a barrel. Both contracts were predicted to suffer weekly losses of between 0.6% and 1.2%.

China’s consumer price index increased 0.2% year-over-year in May, while factory gate prices declined at the fastest pace in seven years, data from the National Bureau of Statistics showed Friday. This shows that the country’s economic recovery was weak in the second quarter.

Bets that a recovery in China will lift oil demand to record highs this year were further eroded by the data, which came on the heels of a run of dismal economic prints from the country over the last two weeks. 

Despite signals of tighter supply following a further production cut by Saudi Arabia, crude prices are on track for a second straight week of falls due to concerns over sluggish demand.

Oil markets were also clouded by signals of a U.S. economic slowdown, with company activity slowing through May and the jobs market cooling.

All eyes are on the Federal Reserve’s meeting next week for further indications of the central bank’s approach to policy in light of the deteriorating economic climate.

One in four traders now expect the Fed to raise rates by a quarter point on June 14, while the majority (75%) expect a pause, according to a Reuters report. But market expectations place the likelihood of a rise at around 80% for the July 26 decision.