Oil Prices Dip on China’s Weak Economy
By Adedapo Adesanya
Oil prices fell over 1 per cent on Tuesday on sluggish Chinese economic data, which comes at a time that the world’s largest importer is facing a series of challenges.
Brent crude futures fell $1.32, or 1.5 per cent, to settle at $84.89 a barrel, while U.S. West Texas Intermediate crude (WTI) dropped $1.52, or 1.8 per cent, to $80.99.
Data released by the China National Bureau of Statistics (NBS) on Tuesday pointed out that the country was growing at a slower-than-expected pace – indicating the engines of business and consumption in the world’s second-biggest economy were severely underpowered.
China’s industrial output and retail sales data showed the economy slowed further last month, intensifying pressure on already faltering growth and prompting authorities to cut key policy rates to bolster economic activity.
China’s central bank lowered interest rates marginally after the data that highlighted intensifying pressure on the economy, mainly from the property sector.
This is as analysts considered that the cut was too small to make a meaningful difference.
There are also concerns that China could struggle to meet its growth target of about 5 per cent for the year without more fiscal stimulus.
Barclays cut its forecast for China’s 2023 growth in gross domestic product to 4.5 per cent, citing a faster-than-expected deterioration in the housing market.
On the positive side, refinery throughput in China rose in July by 17.4 per cent from a year earlier as refiners kept output elevated to meet the demand for domestic summer travel and to cash in on high regional profit margins by exporting fuel.
Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organisation of the Petroleum Exporting Countries (OPEC) and allies, have helped to prop up a rally in prices over the past seven weeks.
Now, the market is looking to China for its direction, and it is signalling downward.
Crude stocks dropped by about 6.2 million barrels last week, according to market sources citing American Petroleum Institute (API) figures released late Tuesday.
The official weekly government data from the Energy Information Administration (EIA) is due later on Wednesday.