Investing.com — Oil prices fell Monday as investors eyed a barrage of Chinese economic data for more signals on demand ahead of the U.S. Federal Reserve policy meeting later this week.
At 09:15 ET (14:15 GMT), the February maturity fell 0.4% to $74.19 per barrel, while yields fell 1.1% to $70.54 per barrel.
Both contracts have cooled after posting stellar gains last week, as US officials outlined the possibility of more oil sanctions on Russia – a move that will tighten markets significantly in the coming year.
But oil still remained under pressure due to concerns about sluggish demand. Markets were also largely cautious ahead of a Fed meeting this week, where the central bank is widely expected to cut rates by 25 basis points but also signal a slower pace of cuts through 2025.
China industrial production, retail in focus
The world’s biggest oil importer China was in line with expectations for November and slightly higher compared to last year’s growth as the country’s stimulus measures supported business activity, data showed on Monday.
However, the figures for November were significantly lower than expected, as private spending remained weak.
Other data showed China’s unchanged at 5%.
China’s slowing economy remains a critical issue for oil traders. Markets have witnessed weaker than expected demand growth in China, traditionally a key driver of global oil consumption.
Last week, the International Energy Agency noted that Chinese oil demand has shrunk, further underscoring fears of oversupply in the coming year.
Last week, a key meeting on Chinese economic policy also concluded without providing any major clues on stimulus plans.
Prices had risen sharply last week on expectations of more stimulus from China’s Central Economic Working Conference. However, updates from the meeting provided no indication of bold new measures by China to immediately boost its economy.
“is trading with marginal losses this morning after sliding higher late last week. Concerns over weakening demand in China have largely overshadowed the threat of tougher US and European sanctions on Russian oil supplies,” ING analysts said in a note. .
Markets are weighing the oversupply risk
The IEA last week maintained its expectation that the oil market will remain adequately supplied, despite a slight increase in demand forecast for next year.
The Organization of the Petroleum Exporting Countries, known as OPEC, had last week cut its forecast for oil demand growth in 2024 and 2025, the fifth straight cut. The cartel had also recently extended its supply restrictions.
These factors collectively reinforced bearish sentiment as oversupply risk coincided with softer demand expectations.
But oil still posted strong gains last week as fears of weaker demand were largely offset by the potential for tighter oil markets in light of tighter U.S. sanctions.
In addition to tougher measures against Russia, the US could also take a more aggressive stance against Iran, especially as Tehran was seen as potentially losing a foothold in Syria.
(Ayushman Ojha contributed to this article.)
