Oil fell to its lowest level in nearly two weeks on growing concerns that China’s faltering economy will erode demand from the world’s biggest crude importer.
US oil futures settled below $81 a barrel in thin trading, falling along with stocks and challenging the strength of underlying physical markets. An unexpected interest rate cut by China’s central bank highlighted the problems besetting Beijing, from a worsening housing slump and weak consumer spending to fears about banking in the shadow
“Oil markets are suffering from economic growth issues,” said Giovanni Staunovo, an analyst at UBS Group AG. “Chinese economic data continues to disappoint, while U.S. economic data (retail sales) was stronger, with market participants worried that they will require even higher policy rates from the Fed.”
The feeling of weakness comes despite physical markets continuing to show signs of strength. Crude stockpiles in the Cushing, Okla. hub are drawing to their lowest level since April, while Asian refiners continue to increase imports. Supplies have become increasingly tight since late June as OPEC+ chiefs Saudi Arabia and Russia cut output, helping to deplete inventories. The two crude oil benchmarks continue to trade strongly in retreat, a market structure that indicates a short-term supply constraint.
Consumption has also been more robust than many observers expected. The International Energy Agency estimates that global demand has been a record, and in the US, Energy Information Administration figures showed record levels of seasonal use.
But the recovery has faded in recent trading sessions on growing concerns that Chinese demand has already peaked for the year. Consumer spending and industrial production have disappointed, unemployment has risen and turmoil in the shadow banking industry is fueling broader fears about the country’s economic health.
Prices:
- WTI for September delivery was down $1.52 at $80.99 a barrel.
- Brent for October settlement lost $1.32 to $84.89 a barrel.
-With the assistance of Rachel Graham and Alaric Nightingale.
