Investing.com — Oil prices fell sharply Wednesday after weak manufacturing data from China, the world’s largest crude importer, raised fears about demand growth in the second half of the year.
By 09:00 ET (13:00 GMT), futures traded 3.3% lower at $67.17 a barrel, while the contract fell 2.8% to $71.63 a barrel.
Activity data released earlier Wednesday showed that China’s , an important regional growth driver, shrank for a second straight month in May.
This raised concerns of slowing oil demand in the world’s second largest economy, which had been expected to be behind much of the previously predicted growth to record highs of oil demand this year following the end of its severe COVID restrictions.
Oil is down over 16% this year as China’s lackluster economic recovery and tighter monetary policy from the Federal Reserve weighed on the demand outlook.
A bill to lift the $31.4 trillion U.S. debt ceiling is expected to face a vote in the House of Representatives later Wednesday, and if passed would head to the Senate, as a June 5 deadline looms.
However, this bill passing into law could embolden the to continue its rate tightening as inflation remains elevated.
“Demand concerns continue for now due to uncertainty over the U.S. debt ceiling deal and a weaker set of economic data from Europe and China,” said analysts at ING, in a note.
Attention is now turning to the weekend’s meeting of the Organization of the Petroleum Exporting Countries and allies, including Russia, in terms of future oil production levels.
The group of major producers decided to voluntarily cut output levels when they met in April in order to boost prices, and there have been mixed signals over the last week over whether this move will be duplicated.
“The possibility of another production cut from the OPEC+ at its June meeting appears slim for now, but it can’t be ruled out completely,” ING added.
Oil prices will edge up from current levels as supplies remain restricted, but economic headwinds will keep them below $90 a barrel this year, according to a Reuters poll, published earlier Wednesday.
A survey of 43 economists and analysts forecast Brent crude would average $84.73 a barrel in 2023, down from the $87.1 consensus in April, while West Texas Intermediate is expected to average $79.20 a barrel in 2023, down from the previous month’s $82.23 consensus.
U.S. crude inventories are due later in the session from industry group , following on from last week’s hefty draw of 6.8 million barrels.
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