Oil prices fluctuated with no clear direction on Monday, caught between concerns about China’s economic health, which could dampen demand, and efforts to stimulate recovery, such as the Chinese central bank’s interest rate cut.
Brent Crude Dips Slightly
Around 09:30 GMT (11:30 in Paris), the price of Brent crude oil for September delivery edged down 0.15% to $82.50 per barrel.
Its American counterpart, West Texas Intermediate (WTI) crude for August delivery, which was in its final day of trading, also slipped 0.15% to $80.01, briefly dipping below $80 for the first time since mid-June.
Rate Cut Sparks Initial Rise
Prices initially rose at the start of the European session “following the unexpected interest rate cut in China, a decision by the People’s Bank of China aimed at supporting the economy,” which could “slightly ease concerns about the country’s crude oil demand,” said Samer Hasn, an analyst at XS.com.
China’s Economic Woes
The Chinese central bank lowered two benchmark interest rates on Monday, hoping to boost the faltering growth of the world’s second-largest economy after a series of disappointing economic indicators.
The Asian giant is grappling with an unprecedented crisis in its vast real estate sector, persistently weak consumption, and high youth unemployment. A year and a half after lifting pandemic restrictions that hampered activity, the much-anticipated post-Covid recovery has been short-lived and less robust than expected.
Impact on Oil Demand
“The stagnation of the (Chinese) economy is inevitably reflected in the various oil data,” said Tamas Varga of PVM Energy.
“The country, which is supposed to be the beating heart of oil demand growth, has demanded, on average” 2.3% “less foreign crude oil in the first half of the year” compared to the same period in 2023, he added.
Key Economic Data on the Horizon
Elsewhere, the week will be “marked by a series of key data for the energy markets, which will help determine the state of economic activity, both in the United States and in the eurozone,” said Samer Hasn.
On Wednesday, markets will await the release of the July flash composite PMI index by S&P Global for the eurozone.
Investor attention should then be absorbed on Friday by the release of the June PCE index on inflation in the United States, the Federal Reserve’s (Fed) preferred measure for tracking inflation.
Markets are also awaiting the release of US GDP for the second quarter on Thursday.