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Oil Falls Below $75 on Risk-Averse Mood, US Gulf Output

FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann
FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann
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Oil Falls Below $75 on Risk-Averse Mood, US Gulf Output

FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann
FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann

Oil dropped more than $1 a barrel to below $75 on Monday as rising risk aversion weighed on stock markets and boosted the US dollar, while more US Gulf oil output came back online in the wake of two hurricanes.

The dollar rallied to its highest in a month on Monday as pending catastrophe at developer China Evergrande added to a cautious mood and as investors braced for the Federal Reserve to take another step towards tapering this week, Reuters reported.

"Far East stock markets and the strong dollar are affecting oil," said Tamas Varga of oil broker PVM. "Nonetheless, unless all hell breaks loose, the positive sentiment ought to prevail."

Brent crude fell 76 cents, or 1%, to $74.58 at 0815 GMT, having dropped as low as $74.26 earlier in the session.

US West Texas Intermediate (WTI) declined 89 cents, or 1.2%, to $71.08.

A stronger dollar makes US dollar-priced oil more expensive for holders of other currencies and generally reflects higher risk aversion, which tends to weigh on oil prices.

Brent has gained 44% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies and some recovery in demand after last year's pandemic-induced collapse.

Oil had gained additional support from supply shutdowns in the US Gulf of Mexico due to the two recent hurricanes, but as of Friday producing companies had just 23% of crude production offline, or 422,078 barrels per day.

"US production in the Gulf of Mexico, which had been shut down as a result of the hurricane, is gradually returning to the market," said Carsten Fritsch, analyst at Commerzbank.

A rise in the US rig count, an early indicator of future output, to its highest since April 2020 also kept a lid on prices.

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China’s Economy Set to Slow in Q2 as Pressure from US Tariffs Mounts

A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)
A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)
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China’s Economy Set to Slow in Q2 as Pressure from US Tariffs Mounts

A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)
A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)

China's economy is likely to have cooled in the second quarter after a solid start to the year, as trade tensions and a prolonged property downturn drag on demand, raising pressure on policymakers to roll out additional stimulus to underpin growth.

The world's No. 2 economy has so far avoided a sharp slowdown in part due to a fragile US-China trade truce and policy support, but markets are bracing for a weaker second half as exports lose momentum, prices continue to fall, and consumer confidence remains low.

Data due Tuesday is expected to show gross domestic product (GDP) grew 5.1% year-on-year in April-June, slowing from 5.4% in the first quarter, according to a Reuters poll. The projected pace would still exceed the 4.7% forecast in a Reuters poll in April and remains broadly in line with the official full-year target of around 5%.

"While growth has been resilient year-to-date, we still expect it to soften in the second half of the year, due to the payback of front-loaded exports, ongoing negative deflationary feedback loop, and the impact of tariffs on direct exports to the US and the global trade cycle," analysts at Morgan Stanley said in a note.

"The third-quarter growth could slow to 4.5% or lower, while Q4 faces unfavorable base effect, putting the annual growth target at risk," the analysts said. They expect Beijing to introduce a 0.5-1 trillion yuan ($69.7 billion-$139.5 billion) supplementary budget from late in the third quarter.

China's exports regained some momentum in June while imports rebounded, as factories rushed out shipments to capitalize on a fragile tariff truce between Beijing and Washington ahead of a looming August deadline.

GDP data is due on Tuesday at 0200 GMT. Separate data on June activity is expected to show both industrial output and retail sales slowing.

On a quarterly basis, the economy is forecast to have expanded 0.9% in the second quarter, slowing from 1.2% in January-March, the poll showed.

China's 2025 GDP growth is forecast to cool to 4.6% - falling short of the official goal - from last year's 5.0% and ease even further to 4.2% in 2026, according to the poll.

BALANCING ACT

Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year.

Analysts polled by Reuters expect a 10-basis point cut in the seven-day reverse repo rate - the central bank's key policy rate - in the fourth quarter, along with a similar cut to the benchmark loan prime rate (LPR).

Beijing has ramped up infrastructure spending and consumer subsidies, alongside steady monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from US President Donald Trump's trade tariffs.

But China observers and analysts say stimulus alone may not be enough to tackle entrenched deflationary pressures, with producer prices in June falling at their fastest pace in nearly two years.

Expectations are growing that China could accelerate supply-side reforms to curb excess industrial capacity and find new ways to boost domestic demand.

It's a stiff challenge, analysts say, as Chinese leaders face a delicate balancing act in their quest to cut production while maintaining employment stability in the face of a worsening labor market outlook.