London, Aug 15, 2023 – Oil prices edged lower on Tuesday on sluggish Chinese economic figures coupled with fears that Beijing’s unexpected cut in key policy rates was not substantial enough to rejuvenate the country’s sputtering post-pandemic recovery.
Brent crude futures dipped 73 cents to $85.48 per barrel by 1151 GMT. U.S. West Texas Intermediate crude slipped 91 cents to $81.6 a barrel.
Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and allies, had helped galvanise a rally in prices over the past seven weeks.
China’s industrial output and retail sales data on Tuesday showed the economy slowed further last month, intensifying pressure on already faltering growth and prompting authorities to cut key policy rates to shore up activity.
“When the oil market appears to be comfortable in rally of late, it is often the case that China is the number one fire douser, throwing a wet blanket over those dreaming for heady ($)90-handle crude and beyond,” said John Evans of oil broker PVM.
In a surprise move, China’s central bank marginally cut key interest rates on Tuesday, after a broad array of data highlighted intensifying pressure on the economy, mainly from the property sector. But analysts say the cuts were too small to make a meaningful difference.
There are concerns China may struggle to meet its growth target of about 5% for the year without more fiscal stimulus.
On Tuesday, Barclays cut its forcast for China’s 2023 gross domestic product growth to 4.5%, citing a faster-than-expected deterioration in the housing market.
On a brighter note, refinery throughout in July at the world’s biggest oil importer rose 17.4% from a year earlier, as refiners kept output elevated to meet demand for domestic summer travel and to cash in on high regional profit margins by exporting fuel.
Still, sentiment on China is souring, added PVM’s Evans.
“Markets are … becoming bored of the tepid stimulus shown so far from officials who think if they keep talking big and delivering small repeatedly, investors will believe them.” (Reuters)
