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By Peter Nurse
Investing.com — Oil prices fell Monday on disappointment after Chinese authorities revealed a modest economic growth target, raising doubts about the likely extent of the crude demand pickup.
By 08:45 ET (13:45 GMT), futures traded 1.2% lower at $78.73 a barrel, while the contract fell 1.2% to $84.79 a barrel.
Chinese government officials announced a 5% economic growth target for 2023 over the weekend, at the start of the annual session of the National People’s Congress.
This year’s target was the lowest in over 30 years, below last year’s target of around 5.5%, and also beneath expectations that had been ramped up after last week’s impressive business activity numbers.
“The main reason behind this lower target seems obvious as the fiscal deficit last year was very high at 8% to 9% per GDP from a historical point of view. The government would like to slow down the increase in the fiscal deficit by taking advantage of the economic recovery,” said analysts at ING, in a note.
This news deflated hopes for a big pickup in demand from the world’s largest crude importer between now and the end of the year.
That said, there could still be upside from that official forecast, as UBS earlier Monday raised its forecast for China’s economic growth to 5.4% in 2023, up from an earlier estimate of 4.9%.
Analysts at the Swiss banking giant cited a stronger-than-expected recovery after COVID restrictions were dropped and an expected boost to consumer confidence.
Adding to the uncertainty Monday was the report at the end of last week by The Wall Street Journal suggesting that the cohesion at the Organization of Petroleum Exporting Countries is starting to fray.
While Russia has announced a cut in output to reduce the discount it is having to accept on its crude exports, the WSJ reported that the United Arab Emirates is considering leaving the OPEC+ group, seeking the freedom to use the additional capacity it has built in recent years.
Oil has traded in a relatively narrow range since the start of the year as traders have balanced the likely increase in demand from China with expectations of further interest rate hikes from the and the , potentially hitting future economic activity.
There was some good news Monday, with Saudi Arabia raising most of its prices for crude shipments to Asia and Europe for April.
“This is the second consecutive month of price increases and reflects optimistic demand sentiment,” ING added.
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