Oil prices showed minimal movement on Tuesday, reflecting the prevailing pessimism surrounding China’s economic outlook and its impact on demand from the world’s foremost crude importer.
By 0816 GMT, Brent crude was down 43 cents to $84.03 per barrel, while the more active US West Texas Intermediate October contract was down 37 cents to $79.95 per barrel.
The front-month WTI contract expires soon and was down 24 cents at $80.48 a barrel on a very light volume of trades.
China, the world’s second-largest economy, is seen as critical to bolstering oil demand for the rest of the year.
However, the country’s sluggish economic activity has frustrated markets following a post-COVID reopening boost, and the government’s pledges to aid recovery have thus far fallen short of expectations, including a smaller-than-expected cut in a vital lending benchmark on Monday.
“China’s economic weakness will create a ceiling for them this year, especially as Beijing appears committed to avoiding large-scale fiscal stimulus,” Eurasia Group said in a note.
The possibility of another rate hike in the United States, the world’s largest oil consumer, is adding to demand concerns, which central bank officials have not ruled out given persistent inflation.
Market Developments and Supply Dynamics
Meanwhile, the U.S. is expected to continue to draw down stocks. A preliminary Reuters poll showed crude oil and gasoline inventories were expected to have fallen last week, with data from the American Petroleum Institute due later on Tuesday.
The Organization of Petroleum Exporting Countries (OPEC) and allies have successfully supported prices in recent weeks thanks to voluntary supply cuts spearheaded by Saudi Arabia.
However, a possible supply reduction is possible.
A source told Reuters on Monday that Iraq’s oil minister and his Turkish counterpart are expected to discuss a possible resumption of oil exports.
After an arbitration ruling by the International Chamber of Commerce (ICC), Turkey halted Iraq’s 450,000 barrels per day (bpd) of exports through the northern Iraq-Turkey pipeline in March. This equates to roughly 0.5% of the global supply.
On Monday, Shell (SHEL.L) immediately announced that it was investigating the possibility of a leak in the 180,000 barrels per day Trans Niger oil pipeline.