Oil Prices Dip on Concerns Over Chinese Demand Resurgence

Photo : Reuters

Oil prices saw a slight decline on Tuesday as worries about a slowdown in the Chinese economy weighed on demand prospects, although expectations of interest rate cuts by the US Federal Reserve provided some support.

Brent crude futures slipped by 9 cents to $84.76 per barrel by 12:21 GMT, while US West Texas Intermediate (WTI) crude dropped 13 cents to $81.78.

The concerns stemmed from China, where economic growth in the second quarter fell below expectations. Official data revealed a growth rate of 4.7% for April-June, marking the slowest pace since early 2023 and missing the forecast of 5.1%. This slowdown was attributed to a prolonged property market downturn and employment uncertainties.

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Adding to the economic challenges, China's refinery output declined by 3.7% year-on-year in June, continuing a downward trend for the third consecutive month due to scheduled maintenance and weak fuel demand amid lower processing margins.

Meanwhile, Federal Reserve Chair Jerome Powell's comments on Monday suggested growing confidence that inflation is moderating towards the central bank's target, potentially paving the way for interest rate cuts as early as September. Lower interest rates typically stimulate economic activity and oil demand.

On the geopolitical front, tensions escalated in the Middle East as Houthi rebels in Yemen retaliated against Israeli actions by targeting three vessels, including an oil tanker, in the Red and Mediterranean seas with ballistic missiles, drones, and booby-trapped boats. These attacks have forced shipping vessels to take longer routes, delaying oil deliveries and keeping crude on the water for extended periods.

In terms of supply dynamics, Russian Deputy Prime Minister Alexander Novak stated that the global oil market is expected to achieve balance in the second half of the year and beyond, largely due to ongoing production adjustments among OPEC+ countries.

The combination of economic uncertainties in China, potential Fed rate cuts, geopolitical tensions in the Middle East, and supply dynamics continues to influence oil market sentiment, with traders closely monitoring developments that could impact future prices and market stability.

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