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Oil rates drop due to weak economic data from China, US
(MENAFN) Oil prices experienced a decline on Tuesday due to weak economic data from both China and the US. The international benchmark brent crude oil fell by 0.2 percent, settling at USD71.69 per barrel as of 10:48 AM local time (0748 GMT), down from the previous session’s close of USD71.84. Similarly, US benchmark West Texas Intermediate (WTI) decreased by 0.3 percent, reaching USD68.53 per barrel after closing at USD68.71 in the prior session. Despite these drops, expectations that the US Federal Reserve might cut interest rates, along with ongoing conflicts in the Middle East, provided some support to oil prices and limited further declines.
The weakening of oil prices was primarily driven by disappointing economic indicators from China, the world's largest oil importer, and the US, the largest oil consumer. In China, consumer prices rose by only 0.6 percent year-on-year in August, missing expectations. Although China's foreign trade surplus reached USD91 billion and exports increased by 8.7 percent, surpassing forecasts, the modest rise in imports of just 0.5 percent fell short of expectations. This weaker import data heightened concerns about a potential economic slowdown in China, impacting global oil demand.
In the US, inflation data is expected to be released soon, adding to recession concerns that are influencing market sentiments. Analysts speculate that the US Federal Reserve might cut interest rates by 25 basis points this month, with a total reduction of 100 basis points anticipated by the end of the year. These expectations are contributing to market uncertainty, though they have also served to support oil prices by maintaining some upward pressure.
Additionally, ongoing conflicts in the Middle East have added complexity to the oil market. Recent reports indicate that US forces have destroyed two Houthi missile systems and a support vehicle in Yemen, and successfully intercepted a Houthi unmanned aerial vehicle over the Red Sea. These developments, combined with the potential for wider regional conflict affecting global oil supply routes, have provided some support to oil prices. Market participants are also awaiting reports from the Organization of Petroleum Exporting Countries (OPEC) and the Energy Information Administration (EIA) for further insights into global oil market trends and US crude oil production forecasts.
The weakening of oil prices was primarily driven by disappointing economic indicators from China, the world's largest oil importer, and the US, the largest oil consumer. In China, consumer prices rose by only 0.6 percent year-on-year in August, missing expectations. Although China's foreign trade surplus reached USD91 billion and exports increased by 8.7 percent, surpassing forecasts, the modest rise in imports of just 0.5 percent fell short of expectations. This weaker import data heightened concerns about a potential economic slowdown in China, impacting global oil demand.
In the US, inflation data is expected to be released soon, adding to recession concerns that are influencing market sentiments. Analysts speculate that the US Federal Reserve might cut interest rates by 25 basis points this month, with a total reduction of 100 basis points anticipated by the end of the year. These expectations are contributing to market uncertainty, though they have also served to support oil prices by maintaining some upward pressure.
Additionally, ongoing conflicts in the Middle East have added complexity to the oil market. Recent reports indicate that US forces have destroyed two Houthi missile systems and a support vehicle in Yemen, and successfully intercepted a Houthi unmanned aerial vehicle over the Red Sea. These developments, combined with the potential for wider regional conflict affecting global oil supply routes, have provided some support to oil prices. Market participants are also awaiting reports from the Organization of Petroleum Exporting Countries (OPEC) and the Energy Information Administration (EIA) for further insights into global oil market trends and US crude oil production forecasts.
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