By Adedapo Adesanya
Oil prices slid further to a seven-week low on Tuesday as investors worried that demand from China could be weakening.
The price of Brent crude fell by $1.15 or 1.4 per cent during the session to settle at $78.63 per barrel and the US West Texas Intermediate (WTI) crude slumped by $1.08 or 1.4 per cent to $74.73 per barrel.
There are expectations that China’s manufacturing activity will shrink for the third month in a row, adding to worries about the world’s top oil importer.
Staying with China, Citi cut its outlook on the country’s economy, now expecting the gross domestic product (GDP) growth at 4.8 per cent, down from 5 per cent in an earlier forecast, after second-quarter growth came in below predictions.
The Chinese government has vowed to step up support for the economy, but investors expect such measures will be limited since the Third Plenum policy meeting largely reiterated existing goals.
Market participants have been discussing a possible ceasefire deal in Gaza that could reduce the geopolitical risk premium for crude prices.
Analysts noted that a ceasefire deal with Hamas can potentially remove $4 to $7 a barrel of risk premium from the market.
An Israeli air strike in Lebanon targeted a senior Hezbollah commander in the southern suburbs of Beirut. The Israeli military claimed that the strike was in response to a cross-border projectile attack that claimed the lives of 12 children and adolescents over the weekend.
According to certain analysts, Israel’s measured response may indicate that an agreement regarding Gaza is imminent.
The US is considering fresh sanctions on Venezuela, a member of the Organisation of the Petroleum Exporting Countries (OPEC) following disputed results in the South American country’s presidential election.
If the US intensifies its sanctions on the oil producer, the global supply could be reduced as a result of the Venezuelan elections.
The opposition in Venezuela claims that it received 73 per cent of the ballots, although the electoral commission of the country declared President Nicolas Maduro, the victor of the presidential vote that will see him start his third term.
Later in the week prices could move in either direction, with a US Federal Reserve meeting scheduled for Wednesday that could reignite hopes of an interest rate cut before the end of the year.
A day later, OPEC and its allies, OPEC+ will hold a monitoring meeting to review the market, including a plan to start unwinding some output cuts from October. No changes are currently expected.
