Price Performance Indicators

• In a week (6/19 - 6/23) the price of ICDX’s crude oil edged down 2.32 percent.  
• Release of China's declining economic data. 

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Market Review

The price of the ICDX oil contract closed lower at $70.00 per barrel for the week ended May 26, amidst sentiment circulating in the market putting pressure on prices, such as China's declining economic data, cuts in China's GDP projections by several large banks, to cut plans The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia this month agreed on a new oil production deal and the group's biggest producer Saudi Arabia also pledged to cut production in July.

China on June 20 cut its benchmark lending rate (LPR) for the first time in 10 months, by a smaller 10 basis points than expected in the five-year LPR. The rate cut follows recent economic data showing the retail sector is in decline. China's Bureau of Statistics (NBS) reported China's main Trade Balance in May worsened to $65.81 billion versus a forecast of $92.0 billion and an earlier reading of $90.21 billion. Exports fell 7.5 percent on an annual basis. On the other hand, imports fell 4.5 percent on an annual basis. This shows that China's exports and imports in May 2023 decreased. Meanwhile, China's industrial production YoY (May) also decreased by 3.5% compared to the previous level of 5.6%. In addition a number of major banks have slashed their forecasts for China's 2023 gross domestic product growth after May data last week showed the post-COVID recovery in the world's biggest oil importer's economy faltered.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia this month agreed to extend further production cuts of 3.66 million barrels per day through 2024 and agreed to cut output targets whole from January 2024 of 1.4 million barrels per day and agreed on a new production target of 40.46 million barrels per day (million barrels/day). Saudi Arabia is also seen making massive production cuts of around 1 million barrels per day in July, whereupon earlier trade, the Saudi Energy Ministry said the country's production would drop to 9 million barrels per day (bpd) in July from around 10 million bpd. in May, the biggest cut in years amid a broader OPEC+ deal to limit supply until 2024.

Market View

China-America Geopolitical Turmoil Tensions

Economic transitions in the US and China are joined by Sino-American tensions. In addition, the cautious mood of market players ahead of the key central bank's speech at the European Central Bank (ECB) Forum in Sintra also exerted downward pressure on the energy sector. Economic optimism supported by upbeat US data and positive risk headlines from China, especially around the People's Bank of China (PBoC) improvement and talk of more stimulus, defended market optimism. US President Joe Biden said that China has a very big problem. His comments were followed by a Wall Street Journal (WSJ) story saying, "The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, due to growing concerns over the power of the technology in the hands of US rivals, according to people familiar with the situation."

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research