Oil price recedes from 10-month highs

Oil extended losses, further receding from this week’s 10-month highs, as fears about the health of China’s slowing economy and a stronger US dollar wiped out the gains triggered by supply cuts from major producers Saudi Arabia and Russia, Reuters reported.

Brent crude futures dropped 41 cents, or 0.5%, to $89.51 a barrel by 0619 GMT, while US West Texas Intermediate crude (WTI) futures declined 50 cents, or 0.6%, to $86.36.

Both benchmarks reached 10-month highs earlier this week on concerns about potential shortages during the peak winter demand season after Saudi Arabia and Russia extended their voluntary supply cuts to the end of the year.

Despite these bullish signals, China’s bumpy recovery, and the strong US dollar, are weighing on prices, said Priyanka Sachdeva, senior market analyst from Phillip Nova.

Investors expect US interest rates to linger at 20-year highs, and that has unleashed the dollar, making it more expensive to buy crude in other currencies.

The US dollar index was just off a six-month peak on Friday.

“Investors took profits after the recent rally which was driven by concerns over tighter supply following extended production cuts in Saudi Arabia and Russia,” said Tatsufumi Okoshi, senior economist at Nomura Securities.

“The market has factored in the news of lower supply and it would need clear signs of stronger global demand, especially in China, to move higher,” he said, noting investors’ consensus is that Beijing’s stimulus has so far failed to boost to its economy.

China’s overall exports and imports fell in August, data showed on Thursday, as the twin pressures of sagging overseas demand and weak consumer spending squeezed businesses in the world’s second-largest economy.

But China’s crude imports surged 30.9% last month as refiners built inventories and increased processing to benefit from higher profits from exporting fuel.

A bigger-than-expected draw in US crude oil inventories lent muted support to oil prices.