Oil Dips on Faltering Chinese Economy
01.31.2024 By Tank Terminals - NEWS

January 31, 2024 [Reuters]- Oil prices fell on Wednesday, pressured by lacklustre economic activity in leading crude importer China, but a first monthly gain since September remained in sight as flaring tensions in the Middle East heightened supply concerns.

 

Brent crude futures for March, which expire today, fell 87 cents, or about 1.1%, to $82 a barrel by 1103 GMT. The more actively traded April contract fell 80 cents, or about 1%, to $81.70.

U.S. West Texas Intermediate crude futures lost 82 cents, or roughly 1.1%, to $77 a barrel.

Manufacturing activity in China, the world’s second-largest economy, contracted a fourth straight month in January, an official factory survey showed on Wednesday.

The latest sign of the country’s broader economy struggling to regain momentum came days after a court ordered the liquidation of troubled property developer China Evergrande (3333.HK), opens new tab. The real estate sector accounts for a quarter of China’s GDP.

Major forecasters, including the Organization of the Petroleum Exporting Countries (OPEC), see oil demand growth in 2024 driven primarily by Chinese consumption.

“The factory data confirms our view that China, at least for now, is an impediment to global oil demand growth,” said Tamas Varga of oil broker PVM.

The Israel-Hamas war, meanwhile, has expanded to a naval conflict in the Red Sea between the United States and Iran-aligned Houthi militants.

While that has disrupted oil and natural gas tanker shipping, which is driving up delivery costs and starting to affect oil supplies, a Reuters poll suggested that record production in the West and slow economic growth will keep a lid on prices and limit any geopolitical risk premium.

“The main issue with turning outright bullish on crude oil here is the technical picture remains bearish and is yet to catch up with recent events,” including a deadly drone attack on U.S. troops near the Jordan-Syria border last week, said IG market analyst Tony Sycamore.

Yemen’s Iran-aligned Houthi group on Wednesday said it would keep up attacks on U.S. and British warships in the Red Sea in what it called acts of self defence, stoking fears of long-term disruption to global trade.

Meanwhile, Israel’s offensive in Gaza persisted, though Palestinian militant group Hamas said it was studying a new proposal for a ceasefire and release of hostages in Gaza.

 

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