Meanwhile, analysts are keeping an eye on the potential effects of a Fed interest rate cut on crude oil prices.
The oil prices fell in the early hours of Tuesday due to fears that the slowdown in the Chinese economy will slow the demand, Despite the growing consensus on the possibility that the United States Federal Reserve (Fed) start with interest rate cuts in September.
The futures of the Brent were down 70 cents, or 0.82%, at $84.15 a barrel, while U.S. crude West Texas Intermediate (WTI) fell 76 cents, or 0.93 percent, to $81.15.
The economic data Weaker Chinese prices “raise some doubts about whether market participants are being too optimistic” about the outlook for oil demand. China, wrote the market strategist of IG Yeap Jun Rong in an email.
The world’s second-largest economy grew 4.7% in the April-June period, according to official data, its slowest rate since the first quarter of 2023 and below the 5.1% expected in a Reuters poll. growth slowed from 5.3% in the previous quarter, weighed down by the prolonged slump in the real estate sector and job insecurity.
“The figures of the GDP and the retail sales “Second quarter growth has surprised on the downside by a significant margin, while expectations for more aggressive stimulus measures at the Third Plenum risk disappointing,” Yeap added, referring to a key meeting of economic leaders to be held this week in Beijing.
Attention on Fed rates
On the other hand, the president of the Fed, Jerome Powell, said Monday that the three readings of the inflation in USA during the second quarter of this year “add some confidence” that the pace of price increases is returning to the central bank’s target in a sustainable manner, comments that market participants interpreted as an indication that a turn towards monetary policy easing might not be far away.
Lower interest rates reduce the cost of loanswhich can boost economic activity and oil demand.
Some analysts have warned against being too optimistic, as the expected weakness in some US macroeconomic data could indirectly hurt oil demand in the short term.
“The macroeconomic factors “do not favor higher oil prices in the near term (with a cap below $85/barrel for WTI crude) due to the prospect of weaker US retail sales in June, due for release today,” he wrote. Kelvin Wong, market analyst OANDA, in an email.
Source: Ambito
