By Adedapo Adesanya
Oil depreciated on Tuesday, the third straight day of losses, on worries of a slowing Chinese economy, pressuring demand, with Brent down by $1.12 or 1.3 per cent to $83.73 a barrel and the US West Texas Intermediate (WTI) down by $1.15 or 1.4 per cent to $80.76 per barrel.
Weaker economic data continues to flow from China as more government support programmes have been disappointing, with many of China’s refineries cutting back on weaker fuel demand.
Data shows that the world’s second-largest economy grew 4.7 per cent in April-June, its slowest rate since the first quarter of 2023 compared to the previous quarter’s 5.3 per cent expansion, triggered by a long property downturn and job insecurity.
This happened even though declines in benchmarked prices were stemmed by a growing consensus the US Federal Reserve could begin cutting its key interest rate as soon as September.
The US Federal Reserve Chairman, Mr Jerome Powell, said on Monday the three US inflation readings over the second quarter of this year “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target sustainably.
Federal Reserve Governor Adriana Kugler said it would be appropriate to begin easing monetary policy later this year if economic conditions continue to evolve favourably.
Market participants interpreted this as indicating that a turn to interest rate cuts may not be far off. Lower interest rates decrease the cost of borrowing, which can boost economic activity and oil demand.
Analysts cautioned that being overly bullish as expected weakness in some macroeconomic data from the US could still indirectly hurt oil demand in the near term.
Meanwhile, the global economy is poised for moderate growth over the next two years with decreasing activity in the US, a bottoming out in Europe, and greater consumption and exports in China but dangers to the route abound, the International Monetary Fund (IMF) said on Tuesday.
Crude oil inventories in the US fell sharply this week by 4.44 million barrels for the week ending July 12, according to the American Petroleum Institute (API).
For the week prior, the API reported a 1.9 million barrel draw in crude inventories.
This week marks the third week in a row of API-estimated inventory draws for crude oil, for a total loss of 15.5 million barrels.
Official data from the US Energy Information Administration (EIA) will be released on Wednesday.