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Oil slips on fears over higher OPEC supply, slower China demand

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

Brent crude dropped 14 cents or 0.2% to $63.55 a barrel by 1145 GMT, after losing 1.1% the previous day. U.S. West Texas Intermediate (WTI) crude fell 2 cents to $60.62 a barrel, having lost 1.4% on Monday.

They both touched the lowest in more than 6 days, extending losses that started late last week.

Expectations that the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, would boost oil output from April are pushing prices lower.

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“Amid expectations that OPEC+ will increase its output, the reason oil prices do not fall even more is that some production comeback is actually expected by traders already,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.

“The market understands that oil prices are healthy enough for more product to be unearthed, the wild card now is how much more product.”

The group meets on Thursday and could discuss allowing as much as 1.5 million barrels per day (bpd) of crude back into the market.

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OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to reductions agreed to under the previous OPEC+ pact, a Reuters survey found, ending a run of seven consecutive monthly increases.

Meanwhile, China’s factory activity growth slipped to a nine-month low in February, which may curtail Chinese crude demand and pressure oil prices while oil buying from the world’s top importer has already eased lately.

“There are signs that the physical market is not as tight as futures markets suggest,” ING Economics said in a note.

“Chinese buying is reportedly easing, with demand expected to be weaker as we go into Q2 for refinery maintenance.”

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