Oil prices steadied on Tuesday, recovering slightly after a decline prompted by weak economic data from China, which raised concerns about diminishing demand in the world’s largest crude importer. West Texas Intermediate (WTI) crude traded below $71 a barrel after falling 0.8% on Monday, while Brent crude hovered near $74.
Recent Chinese data revealed falling refining activity and weak retail sales, intensifying worries about a slowdown in the country’s oil consumption. While China’s government has signaled additional stimulus to bolster domestic demand, analysts believe that the recent measures may not be enough to address the pressing deflationary pressures, leading to a pessimistic outlook for oil in 2024.
Crude prices are set to finish the year lower than expected, as concerns about an oversupply in 2025 and the ongoing slowdown in China outweigh geopolitical tensions in Russia and the Middle East. At the same time, European nations are preparing to tighten restrictions on tankers carrying Russian crude, while the United States may lower the price cap on Russian oil to limit funds available for the war in Ukraine.
Chris Weston, head of research at Pepperstone Group, expressed surprise that oil prices have not tested $71, given weak demand and disappointing Chinese consumption data. “The news flow is certainly keeping oil traders cautious and preferring to fade rallies,” Weston noted.
Oil prices have remained in a narrow range in recent weeks, leading to the lowest 30-day historical volatility since August. Meanwhile, anticipation builds ahead of the US Federal Reserve’s meeting on Wednesday, with expectations of further interest rate cuts, which could open the door for China’s central bank to ease its monetary policy as well.
