Crude oil prices fell globally on Wednesday due to weak economic growth in China, increases in the US currency, and tensions in the Red Sea brought on by the Israel-Palestine conflict. Brent increased to $82.12 per barrel, up 0.46%.
According to data, West Texas Intermediate (WTI), the benchmark for the United States, was trading at $77.50 per barrel at the same time, down 0.42% from Tuesday’s closing of $77.82 per barrel. The world’s top importer of crude oil, China, released weak economic statistics that raised doubts about demand even though the government was trying to boost the real estate market and other sectors.
The Manufacturing Purchasing Managers’ Index (PMI) reported at 49.2 in January, below the growth threshold of 50 points and suggesting the continuation of the previous quarter’s performance, according to statistics issued by the China National Bureau of Statistics.
The weak data comes in the wake of the liquidation decision over the debt-ridden real estate company Evergrande. Experts concur that the steps taken by the Beijing administration in recent weeks have been necessary for the country’s economy to enter the expected growth trend.
Meanwhile, ongoing tensions in the Red Sea following the Israel-Palestine war continue to support price gains. The Houthi group in Yemen claimed to have received a threat from the US via Amman, warning it that it would open fronts against it in retaliation for its operations against Israel.
‘The American threatening message is in response to the Yemeni people’s rejection of the killing of people in Gaza,’ Muhammad Ali Al-Houthi, a member of the group’s Supreme Political Council, said in a statement on X.
‘We say to the US that any folly in carrying out the American threat will fail and will not stop the Yemeni people from their mission to support Gaza,” he added.
Iran, in response to the US blaming Iran-backed groups for the recent attack on an American base on the Syria-Jordan border, announced that it ‘will respond decisively to any attacks targeting its territory, interests, or citizens.’
Data signalling strong demand in the US, the world’s largest oil consumer, limited further price declines. According to data from the American Petroleum Institute (API), crude oil inventories in the country decreased by 2.5 million barrels, significantly more than the market expectation of a fall of 867,000 barrels.
The official stock data from the US Energy Information Administration (EIA) will be released later on Wednesday. While uncertainties continue regarding when the Fed will initiate its first rate cut, analysts anticipate that more clues will be given about the future of the Fed’s monetary policy in the minutes of the meeting and in Fed Chairman Powell’s statements.
Brent opened lower this morning with prices hovering around US$82 as rising demand concerns (especially from China) have been capping the upside for prices. Meanwhile, a higher USD further added pressure to the complex.
The market is trading cautiously ahead of the potential US response to the recent assault in Jordan and how Iran will react in turn. The market also awaits a decision by the US Fed on policy rates.
US oil inventory numbers overnight from the API were bullish. US crude oil inventories decreased by 2.5MMbbls last week, quite larger than the average market expectations.
