Oil prices ease as concerns intensify over slowing Chinese demand

WEB DESK: Global oil prices eased on Tuesday as diplomatic efforts intensified to achieve a ceasefire in the Middle East and concerns grew over slowing demand in China, the world’s largest oil importer.

Brent crude futures for December fell by 60 cents, or 0.8 per cent, to $73.69 a barrel by 0717 GMT, while US West Texas Intermediate (WTI) futures for November saw a slight drop of 6 cents to $70.50 per barrel, marking the contract’s last day as the front month. The more actively traded WTI December contract was down 57 cents, or 0.8 per cent, to $69.47 per barrel.

This dip follows a near 2 per cent rise in both Brent and WTI on Monday, which saw the market recoup some of last week’s over 7 per cent decline, as the ongoing conflict in the Middle East continues to raise concerns of potential supply disruptions.

According to Priyanka Sachdeva, a senior analyst at brokerage firm Phillip Nova, Monday’s gains were largely due to technical profit-taking and short-covering, despite the overall bearish trend in the market. She noted that forecasts continue to predict softer demand and oversupplied oil markets.

US Secretary of State Antony Blinken arrived in Israel on Tuesday, kicking off a Middle East tour aimed at brokering talks to halt the war in Gaza and ease tensions spilling over into Lebanon. This move has added to the market’s volatility, with crude prices fluctuating based on the shifting dynamics in the region.

Satoru Yoshida, a commodity analyst at Rakuten Securities, pointed out that while oil prices may rise if there are clear signs of China’s economic recovery, supported by Beijing’s stimulus measures, gains will likely be limited by global economic uncertainty.

China, facing sluggish growth, cut its benchmark lending rates on Monday as part of ongoing efforts to stimulate its economy. However, recent data revealed that China’s economy grew at its slowest pace since early 2023, fueling worries about future oil demand.

The International Energy Agency’s head has suggested that China’s oil demand growth is likely to remain weak into 2025, despite these measures, as the country shifts towards electrifying its vehicle fleet.

Despite this, Saudi Aramco remains optimistic about China’s oil demand, particularly in light of the country’s stimulus package aimed at boosting growth, according to the head of the state-owned oil company.

Adding further pressure to the oil market is the strength of the US dollar, which has been bolstered by easing global inflation. A stronger dollar typically weighs on oil prices, as it makes the commodity more expensive for those holding other currencies.

A preliminary Reuters poll indicated that US crude oil stockpiles likely increased last week, while gasoline and distillate inventories were expected to decline.

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