Oil prices come off earlier gains as banks cut China growth forecasts

Global oil prices fell on Monday, backing off last week's gains as questions over China's economy outweighed OPEC+ output cuts and the seventh straight drop in the number of oil and gas rigs operating in the United States. Brent crude lost 68 cents to trade at $75.93 a barrel by 0042 GMT, while U.S. West Texas Intermediate (WTI) crude was down 59 cents to $71.19.

Last week, Brent posted a gain of 2.4 per cent and WTI rose 2.3 per cent. A number of major banks have cut their 2023 gross domestic product growth forecasts for China after May data last week showed the post-COVID recovery in the world's second-largest economy was faltering.

China will roll out more stimulus support for its slowing economy this year, sources told Reuters, but concerns over debt and capital flight will keep the measures targeted at shoring up weak demand in the consumer and private sectors. Still, China's refinery throughput rose in May to its second-highest total on record, helping to boost last week's gains, and U.S. energy firms cut the number of working oil and natural gas rigs for a seventh week in a row for the first time since July 2020.

The oil and gas rig count, an early indicator of future output, fell by 8 to 687 in the week to June 16, lowest since April 2022.Voluntary output cuts implemented in May by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, plus an additional cut by Saudi Arabia in July, are also supporting oil prices.

"There were also signals that the U.S. driving season would bring strong demand," ANZ Research said in a note, pointing out that U.S. gasoline demand climbed to 9.24 million barrels per day last week, its highest level since December 2021.

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