Crude oil futures experienced a second consecutive day of decline on Tuesday (August 22) due to mounting investor worries regarding the potential impact of China’s economic slowdown on oil demand. Simultaneously, news emerged of discussions between Iraq and Turkey aimed at rekindling an oil export deal.
The prices of WTI (West Texas Intermediate) crude futures witnessed a decrease of 37 cents, equivalent to 0.5%, settling at $80.35 per barrel. Similarly, BRENT crude futures saw a decline of 43 cents, constituting a 0.5% drop, reaching $84.03 per barrel.
Jim Ritterbusch, the president of Ritterbusch and Associates, emphasized that apprehensions surrounding China’s decelerating economy and its potential repercussions on oil demand had overshadowed positive developments such as Saudi Arabia’s decision to prolong production cuts and Russia’s announcement of reduced oil exports.
In recent times, China, as the world’s second-largest economy, had been anticipated to play a pivotal role in driving global oil demand recovery this year. However, the country’s weakened economic activities have applied downward pressure on the oil market. This situation has arisen partially due to the Chinese government’s conservative approach toward implementing stimulus measures required for economic recovery. A notable instance was the People’s Bank of China’s decision to lower its LPR rate to a level below market expectations.
The markets experienced additional strain as officials from the Federal Reserve signaled potential interest rate hikes. Thomas Barkin, President of the Richmond Fed, underscored the necessity for the Fed to be receptive to the prospect of an accelerated US economic pace, rather than a decelerated one. This stance reflects the ongoing commitment of the Fed to combat inflation.
Moreover, the trading environment in the oil market was influenced by reports indicating discussions between Iraq’s energy minister and Turkish authorities regarding the revival of oil exports. This development emerged after Turkey suspended the transport of 450,000 bpd (barrels per day) of Iraqi oil via pipelines connecting the two countries back in March.
Investors are maintaining a keen watch on the impending release of the US Energy Information Administration’s (EIA) data on crude inventories. According to an S&P Global Commodity Insights poll, industry analysts are anticipating a decline of 4.24 million barrels in US crude inventories for the previous week.
The Spot Market is Open
Wednesday, August 23, 2023