Crude oil prices were under pressure early Tuesday in the global commodities market, as demand and supply worries remained. Brent sank to $73.52 per barrel, while the US benchmark West Texas Intermediate dropped to $69.50 per barrel, as Chinese demand remained weak.
China, the world’s top oil importer, launched a stimulus package to alleviate persistent troubles in the real estate sector, but analysts say the measures fell short of sector expectations.
To ease the contraction in the real estate industry and housing market, the nation announced a 25 basis point cut in 1- and 5-year loan interest rates, which serve as the standard for corporate and real estate loans.
The contraction in the real estate sector and housing market, both of which negatively impact China’s economic growth, put pressure on crude prices by supporting predictions of declining demand in the country.
According to data, crude oil markets strengthened yesterday with Brent settling almost 1.7% higher on the day. Lingering tension in the Middle East continues to provide support as the market awaits Israel’s response to Iran’s recent attack, ING said in a note.
In addition, a Hezbollah drone strike near the Israeli Prime Minister’s private residence will not have helped to ease tensions, analysts added.
On the demand side, banks in China cut their loan prime rates, which would be welcome news for borrowers. While the cut was unsurprising, the reduction was slightly larger than the market expected.
OPEC+ has revealed plan to gradually bring 2.2 million b/d of oil supply back onto the market next year. ING said this should leave the market in surplus, which will not only keep pressure on flat prices through next year but should also mean further weakness in time spreads.
“Essentially with the market returning to a sizeable surplus, we should at least see the front end of the curve moving into contango”, ING said.
Meanwhile, Israel continues its attacks in northern Gaza despite numerous calls for a ceasefire. At least 20 Palestinians were killed early Tuesday in two separate Israeli army attacks in northern Gaza.
Witnesses said drones are surrounding the Khalifa Bin Zayed School, with officials threatening to kill if they do not evacuate. Concerns that the war could spread over a wider area and disrupt oil supply routes continue to limit further price falls.
