Oil Prices Slump over Demand Concerns in China
Pressure on energy costs reduced as crude oil prices decline in the global commodities market due to demand concerns in China. Oil prices retraced Tuesday after China’s economic growth slowed, and US dollar strengthened amidst potential Fed Fund rates cut in the third quarter.
oil prices decreased on Tuesday as the weak economic data in China caused worries about a slowing economy crimping demand in the world’s largest crude oil importer.
International benchmark Brent crude traded at $84.23 per barrel, representing a decline of 0.73% from the closing price of $84.85 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $80.22 per barrel at the same time, a 0.77% fall from the previous session that closed at $80.84 per barrel.
The price action in oil yesterday was choppy. US dollar movements, Chinese demand concerns and expectations of a tighter global oil balance through the third quarter of the year all contributed to this choppy session.
The gross domestic product (GDP) of China rose by 4.7% in the second quarter of 2024, below market expectations, according to official figures on Monday.
The country’s economy expanded by 5.3% in the first quarter, and the market forecast was a GDP growth rate of 5.1% in the second quarter, the National Bureau of Statistics said.
In addition, refinery activity in China slowed further in June. Refineries processed around 14.25 million barrel per day in the month, down 3.7% year on year.
Meanwhile, cumulative crude processed over the first six months of the year came in at 14.5m b/d, down 0.4%, ING commodities strategists said in email-note.
Trade and output numbers also suggest that China’s apparent oil demand fell to around 13.7m b/d in June, the lowest level since February 2023.
Elsewhere, the US dollar index rose by 0.18% to 104.065 at 09.39 a.m. local time (0639 GMT), compared to the previous trading session close. The higher US dollar curbs oil demand and supports price declines.
Trump was targeted in an assassination attempt during a rally in Pennsylvania on Saturday, just days before he was set to accept the Republican nomination for a third term.
However, increased expectations that the US Federal Reserve’s (Fed) interest rate cut will start soon limited further price declines.
The Fed is receiving ‘more good’ inflation data, paving the way for its first interest rate cut later this year, Chair Jerome Powell said Monday.
Speaking at the Economic Club of Washington, DC, Powell reiterated his comments that the US central bank is looking for ‘greater confidence’ that inflation is returning to its 2% target.
Powell noted the Fed does not need to wait until inflation hits its 2% long-term target to begin lowering interest rates because of the lagging effect of monetary tightening on inflation data. Market players interpreted Powell’s remarks as a return to interest rate cuts may not be far off. Access Holdings Rated Buy on 56% Upside Potential
