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Oil Prices Fall on Weaker US Consumer Demand, China Data

A pump jack drills oil crude from the Yates Oilfield in West Texas’s Permian Basin, near Iraan, Texas, US, March 17, 2023. REUTERS/Bing Guan/File Photo
A pump jack drills oil crude from the Yates Oilfield in West Texas’s Permian Basin, near Iraan, Texas, US, March 17, 2023. REUTERS/Bing Guan/File Photo
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Oil Prices Fall on Weaker US Consumer Demand, China Data

A pump jack drills oil crude from the Yates Oilfield in West Texas’s Permian Basin, near Iraan, Texas, US, March 17, 2023. REUTERS/Bing Guan/File Photo
A pump jack drills oil crude from the Yates Oilfield in West Texas’s Permian Basin, near Iraan, Texas, US, March 17, 2023. REUTERS/Bing Guan/File Photo

Oil prices slipped in Asian trading on Monday after a survey on Friday showed weaker US consumer demand and as May crude production rose in China, the world's biggest crude importer.
Global benchmark Brent crude futures for August delivery were down 29 cents, or 0.4%, at $82.33 per barrel at 0330 GMT. US West Texas Intermediate crude futures for July delivery were also down 29 cents at $78.16 a barrel, Reuters reported.
The more-active August delivery WTI contract slipped 0.4% as well at $77.76 per barrel.
That followed prices slipping on Friday after a survey showed US consumer sentiment fell to a seven-month low in June, with households worried about their personal finances and inflation.
However, both benchmark contracts still gained nearly 4% last week, the highest weekly rise in percentage terms since April, on signs of stronger fuel demand.
Meanwhile, China's May domestic crude oil production rose 0.6% on year to 18.15 million tons, according to data released by the National Bureau of Statistics on Monday.
Year-to-date output was 89.1 million tons, up 1.8% from a year earlier. National crude oil throughput fell 1.8% in May over the same year-ago level to 60.52 million tons, with year-to-date totaling 301.77 million tons, up 0.3% from a year ago.
The country's May industrial output lagged expectations and a slowdown in the property sector showed no signs of easing, adding pressure on Beijing to shore up growth.
The flurry of data on Monday was largely downbeat, underscoring a bumpy recovery for the world's second-largest economy.
On the geopolitical front, concerns of a wider Middle East war lingered after the Israeli military said on Sunday that intensified cross-border fire from Lebanon's Hezbollah into Israel could trigger serious escalation.
After the relatively heavy exchanges over the past week, Sunday saw a marked drop in Hezbollah fire, while the Israeli military said that it had carried out several airstrikes against the group in southern Lebanon.
Markets in key oil trading hub Singapore and other countries in the region were closed for a public holiday on Monday.

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US Inflation Cools in May, Boosting Hopes of Fed Rate Cut

Inflation is receding after spiking in the first quarter as 525 basis points worth of rate hikes from the Fed since 2022 cool domestic demand (Reuters)
Inflation is receding after spiking in the first quarter as 525 basis points worth of rate hikes from the Fed since 2022 cool domestic demand (Reuters)
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US Inflation Cools in May, Boosting Hopes of Fed Rate Cut

Inflation is receding after spiking in the first quarter as 525 basis points worth of rate hikes from the Fed since 2022 cool domestic demand (Reuters)
Inflation is receding after spiking in the first quarter as 525 basis points worth of rate hikes from the Fed since 2022 cool domestic demand (Reuters)

US monthly inflation was unchanged in May as a modest increase in the cost of services was offset by the largest drop in goods prices in six months, drawing the Federal Reserve closer to start cutting interest rates later this year.

The report from the Commerce Department on Friday also showed consumer spending rose marginally last month. Underlying prices advanced at the slowest pace in six months, raising optimism that the US central bank could engineer a much-desired "soft landing" for the economy in which inflation cools without triggering a recession and a sharp rise in unemployment, Reuters reported.

Traders raised their bets for a Fed rate cut in September.

"This was a very Fed-friendly report that should keep the September rate cut in play, while at the same time increasing investor confidence that moderate economic growth can be maintained even as rates stay higher for longer," said Scott Anderson, chief US economist at BMO Capital Markets. "The sharp slowdown in core inflation is just what the doctor needed to see to keep the economy on the soft-landing glide-path."

The flat reading in the personal consumption expenditures (PCE) price index last month followed an unrevised 0.3% gain in April, the Commerce Department's Bureau of Economic Analysis said. It was the first time in six months that PCE inflation was unchanged. Goods prices fell 0.4%, the biggest drop since November.

There were big declines in prices of recreational goods and vehicles as well as furnishings and durable household equipment.

The price of gasoline and other energy goods dropped 3.4%, the biggest slide in six months. Clothing and footwear were also cheaper, while food prices rose marginally.

The cost of services increased 0.2%, lifted by higher prices for housing and utilities as well as healthcare. Financial services and insurance costs declined 0.3% after rising for five straight months. These costs, together with housing, have been among the major drivers of services inflation.

In the 12 months through May, the PCE price index increased 2.6% after advancing 2.7% in April. Last month's inflation readings were in line with economists' expectations.

Inflation is receding after spiking in the first quarter as 525 basis points worth of rate hikes from the Fed since 2022 cool domestic demand. Inflation, however, continues to run above the central bank's 2% target.

Financial markets saw a roughly 68% chance that the Fed's policy easing would start in September compared to about 64% before the data, though policymakers recently adopted a more hawkish outlook. The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July.

Economists were divided on whether the Fed would still reduce borrowing costs twice this year amid solid wage growth. The release of the U.S. employment report for June next Friday could shed more light on the monetary policy outlook.

Stocks on Wall Street were trading largely higher. The dollar was little changed against a basket of currencies. U.S. Treasury prices were mixed.