Oil staring at $70s lows again, with less love from China this time

Investing.com — The oil bull is probably as frustrated as the bull. And both have China to blame.

After persistent losses over three days, crude futures have wiped out gains from the first two sessions of the week to finish down for a fourth straight week. 

New York-traded West Texas Intermediate, or , crude settled Friday’s trade down 83 cents, or 1.2%, at $70.04 per barrel.

For the week, the U.S. crude benchmark showed a loss of 1.8%. Over the past four weeks combined, WTI was down 15%.

London-traded settled Friday’s session down 81 cents, or 1.1%, at $74.17. The global oil benchmark showed a drop 1.5% on the week and almost 14% over the past four weeks. 

Blame for the situation in oil could be apportioned to some extent on the on-off-and-on again U.S. banking crisis, continued wrangling over the nation’s debt crisis and recession fears that are growing by the day.

Yet, an old phenomena was also making its comeback and could no longer be ignored — weak demand from China.

The world’s second largest economy isn’t rebounding as fast as many thought it would after abandoning all caution over COVID. And that is a problem for most commodities, including oil and copper, which count heavily on Chinese buying. 

Data out of Beijing on Thursday showed Chinese barely grew in April, while sank to its weakest level since the peak of the pandemic in 2020.

Chinese trade data earlier this week was also disappointing, showing an economy struggling to pick up despite various stimulus measures put into place since the country turned its back on COVID lockdowns early this year.

“It would appear traders are waiting for one of two events to dictate the path of travel going forward; another bank failure or an OPEC+ production cut,” said Craig Erlam, analyst at online trading platform OANDA. “You could throw US debt ceiling drama and default into the mix but I’m only inclined to focus on remotely plausible events at this stage.”

“In the interim, oil appears to have stabilized in the lower trading range it briefly entered into in March, between $70-$78 in Brent or roughly $64-74 in WTI. A lower growth environment is seemingly expected now in light of recent bank failures and a less inspiring Chinese COVID recovery.”