Investing.com — Oil prices edged lower on Tuesday as economic weakness in top importer China worsened the global energy outlook at a time when many were hoping for a summer-induced slump in supply demand.
At 2:30 PM ET (18:30 GMT), the price was down 1.3% at $93.73 per barrel, while the stock was down 1.4% at $80.76 per barrel.
Weak GDP and Trump’s popularity weigh on China’s prospects
Sentiment toward top oil importer China worsened this week after data showed the country’s economy grew less than expected in the second quarter.
Growth slowed due to weak domestic consumption, a trend that is also expected to weigh on fuel and travel demand in the country.
Import data for June showed Chinese crude oil supplies fell sharply over the month, raising concerns about slowing demand.
Concerns about China’s economy also grew amid increased speculation that Donald Trump would win the 2024 US presidential election, especially after the assassination attempt appeared to have boosted his popularity.
Trump has maintained largely negative rhetoric toward China. His administration imposed high trade tariffs on China, sparking a trade war between Washington and Beijing in the late 2010s.
New domestic inventory data points to signs of improving demand in the summer
The recent crude oil weakness comes just ahead of new crude inventory data later in the session and the Energy Information Administration’s weekly report due Wednesday.
Inventories fell by as much as 12 million barrels in the week ending July 5, marking the biggest single-week drop in 11 months and reviving hopes that traditional summer demand will lead to a reduction in global supply.
“U.S. crude demand has improved after a soft start to the 2024 summer season, pushing crude oil prices higher,” Wells Fargo said in a recent note.
Hopes for rate cuts are increasing, but the dollar is resilient
Crude oil losses were limited by growing optimism about a US rate cut in September, especially after a slew of comments from Fed head Jerome Powell suggested the US central bank was gaining confidence in reducing inflation.
Lower rates boost economic activity, which bodes well for oil demand. Hopes of a soft landing for the US economy as inflation falls also offer better prospects for demand.
Interest rates have fallen in recent weeks due to speculation about rate cuts, which has benefited crude prices. But the dollar reversed its losses on Monday as markets also saw that Trump’s presidency could potentially boost the dollar.
(Peter Nurse, Ambar Warrick contributed to this article.)
