By Adedapo Adesanya
The oil market fell on Monday as China’s ailing property sector sparked demand worries, causing traders to reassess the supply risk premium from escalating tensions in the Middle East.
Brent crude futures depreciated by $1.15 or 1.4 per cent during the session to settle at $82.40 a barrel, as the US West Texas Intermediate crude futures dropped $1.23 or 1.6 per cent to trade at $76.78 per barrel.
Both contracts settled lower as attention shifted to demand concerns in China, where a real estate crisis deepened with a Hong Kong court ordering the liquidation of property giant China Evergrande Group.
The development comes against the backdrop of a spiralling debt crisis in the country.
China Evergrande, which was once one of the country’s largest property developers, has, in the last few years, been enveloped in the country’s debt crisis.
Last week, China’s central bank and the Ministry of Finance announced measures to help boost the liquidity available to property developers.
The actions, which will be valid until the end of this year, will help ease a lingering cash crunch for Chinese developers after China cracked down on the sector to address bloated debt levels in real estate.
The deepening real estate crisis is a blow to investor confidence in the top oil importer’s economy, with earlier data showing slower-than-expected activity.
Also, pressure continued from the geopolitical front as a fuel tanker was hit by a missile in the Red Sea, and US troops were attacked in Jordan near the Syrian border.
The events mark a major escalation of tensions that have engulfed the Middle East, with the US vowing to take “all necessary actions” to defend its troops. However, President Joe Biden’s administration stressed it was not seeking a war with Iran.
The attack on Sunday killed three US soldiers and wounded more than 40 troops. It was the first deadly strike against U.S. troops since the Israel-Hamas war erupted in October.
Meanwhile, lingering high interest rates were also in focus after European Central Bank (ECB) policymakers were unable to reach a consensus on Monday over when interest rates should be cut.
Russia, meanwhile, is likely to cut exports of naphtha, a petrochemical feedstock, by between 127,500 and 136,000 barrels per day—about a third of its total exports—after fires disrupted operations at Baltic and Black Sea refineries.
Another Russian oil facility came under attack on Monday, with Russian authorities indicating they had stopped a drone attack on the Slavneft-Yanos refinery in the city of Yaroslavl.
Modupe Gbadeyanka