Oil Prices Open Lower on Friday as Uncertainty Surrounding Chinese Demand Remains

Global oil prices extended their decline on Friday as concerns over China slowing demand for the commodity and the United States-Iran nuclear deal continue to weigh on the market outlook.

Brent crude oil declined by 26 cents or 0.3 percent to $75.70 a barrel by 07:3 am while the U.S. West Texas Intermediate crude oil shed 22 cents or 0.3% to $70.94.

“Oil prices are expected to stay in a range of about 3 dollars above and below $70 for WTI in the near term,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Both benchmarks slid by around $1 on Thursday, rebounding from their earlier losses of more than $3, after the U.S. and Iran both denied a report by the Middle East Eye that they were close to a nuclear deal.

For the week, they are on track for losses of about 1%, similar to last week.

Oil prices had risen early in the week following Saudi Arabia’s pledge over the weekend for deep output cuts, but they pared gains on a rise in U.S. fuel stocks and weakness in Chinese export data.

Expectations of tighter supply and higher demand as the United States enters the summer holiday season when more people drive are being offset by worries over a slow pickup in China’s fuel demand, Yoshida said.

“Crude prices didn’t get any favours from China as their economic recovery has disappointed,” said Edward Moya, an analyst at OANDA.

Although the Chinese economic recovery has been slower than expected, India – the world’s third-largest oil consumer – has managed to sustain economic momentum.

Strong factory activity helped Indian fuel consumption surge in May, driving diesel sales to a record high.

Some analysts expect oil prices to get a lift if the U.S. Federal Reserve skips a rate hike at its next meeting on June 13-14. Economists polled by Reuters expect no hike at the meeting.

However, the absence of similar signals from other major central banks was weighing on the outlook for oil demand, Moya said.