Investing.com — Oil prices fell Tuesday, hit by concerns about the economic health of top importer China and caution ahead of the Federal Reserve’s final policy meeting of the year.
At 08:40 ET (13:40 GMT), it was trading 1% lower at $73.20 per barrel, while trading 1.6% lower at $69.56 per barrel.
Weak Chinese data clouds require forecasting
Crude oil market sentiment has been hit by data illustrating China’s economic weakness, suggesting demand next year may be below expectations for the world’s biggest oil importer.
increased as expected, slightly higher than October’s growth and indicating a modest improvement in the industrial sector.
However, growth slowed sharply in November, lagging expectations and highlighting persistent weaknesses in consumer spending.
Furthermore, the real estate sector fell 5.7% year-on-year in November, following a 5.9% decline in October, highlighting the ongoing challenges in the real estate sector.
These indicators raise concerns for the oil market as the slowdown in retail sales reflects fragile domestic demand, potentially depressing energy consumption. Moreover, the modest increase in industrial production suggests that manufacturing activities are not robust enough to significantly boost oil demand.
The markets are cautiously awaiting the Fed’s interest rate decision
Markets were also cautious ahead of this week, where the central bank is widely expected to cut rates by 25 basis points but also signal a slower pace of cuts before 2025.
The prospect of lower interest rates generally supports economic growth, potentially boosting oil demand. However, uncertainty surrounding the pace of future Fed rate cuts has led to some hesitation in the market.
This cautious sentiment is also contributing to the current weakness in oil prices, as traders await clearer signals from the upcoming central bank meeting, which will conclude on Wednesday.
After last week’s strong gains, oil prices remained under pressure this week. The potential for tighter oil markets in light of tougher US sanctions on Russia, and expectations of new stimulus from China, had lent support to oil prices last week.
(Peter Nurse contributed to this article.)
