BNR – Oil prices experienced a slight dip on Tuesday due to lacklustre economic indicators from China.
This was coupled with apprehensions that China’s reduction in policy rates might not be substantial to invigorate faltering post-Covid recovery.
During midday trading, Brent crude futures edged down by 54 cents, settling at $85.67 a barrel by 1317 GMT. However, US West Texas Intermediate crude saw a decrease of 74 cents, landing at $81.77. Earlier in the session, both benchmarks had undergone a decrease of more than one US dollar.
Bolstering Oil Prices
Recent efforts by Saudi Arabia and Russia, which are part of the OPEC+ alliance have succeeded in bolstering oil prices. This was over the past seven weeks through the use of supply cuts.
However, China’s latest data concerning industrial output and retail sales unveiled a further deceleration in economic growth last month.
This intensified existing strains on the economy and prompted authorities to implement rate reductions as a measure to stimulate activity.
John Evans, an oil broker at PVM, commented that the oil market seemed comfortable.
He added that it is often the case that China is the number one fire douser. “Throwing a wet blanket over those dreaming of prices north of $90,” he said.
China’s central bank executed a marginal reduction in interest rates in response to data indicating escalating pressures on the economy.
Nevertheless, analysts argue that the magnitude of the rate cut was insufficient to yield a significant impact.
Market Disenchantment Grows Amidst China’s ‘Tepid Stimulus’
Concerns are surfacing over China’s ability to achieve a growth target of 5% without implementing more substantial fiscal stimulus measures. Barclays recently revised its projection for China’s 2023 gross domestic product growth to 4.5%.
Although China’s refinery throughput experienced a surge of 17.4% year-on-year in July, market sentiment towards China is taking a downturn.
PVM’s Evans emphasised the market’s growing disenchantment with what he referred to as “tepid stimulus” from officials who promise substantial measures but fail to deliver.