Global oil prices dip over China’s economic slowdown
With the ongoing economic slowdown in China and diminishing hopes for imminent US interest rate reductions, global oil prices saw a decline in the early trade today. These concerns outweighed supply apprehensions triggered by escalating tensions in the Middle East.
Trading at US$89.16 a barrel, Brent futures for June delivery experienced a minor decrease of 7 cents or 0.1%. Similarly, US crude futures for May delivery fell by 10 cents, or 0.1%, trading at US$85.26 a barrel.
Despite geopolitical tensions, oil prices have weakened this week due to economic challenges impacting investor sentiment. The market is closely watching the potential Israeli response to Iran’s recent attack on its territory, said Hiroyuki Kikukawa, president of NS Trading, a Nissan Securities subsidiary.
“Demand concerns have arisen due to the anticipated delay in US interest rate cuts and underwhelming economic data from China.
“The market, which was previously on an upward trend due to supply concerns amid escalating Middle Eastern tensions, has not seen a significant boost due to the relatively restrained Iranian aggression.”
Kikukawa predicts that without any new developments, WTI would likely trade around US$83 to US$88.
In light of stronger-than-expected inflation data, Fed Chair Jerome Powell stated that the Federal Reserve would likely need more time to ensure inflation is moving towards the 2% mark.
China, the world’s largest oil importer, showcased faster-than-expected economic growth in Q1. However, various March indicators, including property investment, retail sales, and industrial output, signify that domestic demand remains weak, thereby impacting overall momentum.
In the Middle East, Israel’s third war Cabinet meeting, initially scheduled for yesterday to decide upon a response to Iran’s first direct attack, has been postponed to today. Western allies are considering swift new sanctions against Tehran in an attempt to dissuade Israel from escalating the situation further.
However, analysts believe that Iran’s unprecedented missile and drone strike on Israel is unlikely to lead to dramatic sanctions on Iran’s oil exports from the Biden administration, given concerns about inflating oil prices and upsetting China, the top buyer, reported Bangkok Post.
In other news, US crude oil inventories saw a more-than-expected rise last week, according to market sources citing American Petroleum Institute figures yesterday. However, gasoline and distillate stockpiles decreased.
