On Tuesday, the price of crude oil continued to fall as investors worried about a slowdown in China’s economic expansion and anticipated further US interest rate increases. Benchmark Brent crude for international trading closed at $84.36 per barrel, down 0.12% from Monday’s closing price of $84.46 per barrel.
West Texas Intermediate (WTI), the American benchmark, was trading at the same time at $80.06 a barrel, down 0.07% from the session’s closing of $80.12 per barrel. As a result of output reductions from OPEC+ nations Saudi Arabia and Russia, tight global supply worries have kept oil prices trading at their highest levels this year.
However, demand concerns brought on by anxieties about a slowdown in China’s economic development and anticipations of more interest rate increases in the US dampened sentiment. The prospect of softer Chinese demand after a disappointing interest rate cut is putting pressure on oil prices.
China’s producer pricing index (PPI) dropped by 0.3% while the consumer price index (CPI) dropped by 4.4% last month. This was the first time since 2020 that both indices dropped at the same time, raising fears of deflation.
The prime rate for one-year loans was decreased by the People’s Bank of China (PBOC) on Monday from 3.55% to 3.45% while the rate for five-year loans remained constant. The potential of more rate increases in the US is also supporting the drop in oil prices.
Investors worry that rising US interest rates might potentially reduce demand for oil in the world’s top oil consumer as markets wait for additional indications on the US Federal Reserve’s (Fed) monetary policy.
