Oil Prices Decline on Demand Concerns

Investing.com — Oil prices fell sharply Tuesday amid worries about demand growth in China, the world’s largest crude importer, alongside fears of a potential supply surplus, just ahead of fresh U.S. crude inventory data.

At 14:30 ET (18:30 GMT), Brent oil futures declined 1.2% to $78.80 a barrel, while West Texas Intermediate crude futures decreased 1.4% to $74.74 a barrel.

Weak Chinese Data Weighs

A series of disappointing economic reports from China has heavily influenced commodity prices, particularly following lackluster GDP data released earlier this month.

The Politburo, a top decision-making body of China’s ruling Communist Party, pledged at the end of its July meeting to pursue a “proactive” fiscal policy, indicating that more stimulus measures may follow to boost the country’s struggling economy.

Macquarie noted in a Tuesday report, “We believe recent liquidation is being driven by macro and algorithmic flows as demand from China, the world’s largest crude importer, posted its slowest economic growth in five quarters.”

Israel Strikes Beirut

The crude price risk premium was slightly revived after Israel announced a military strike against a Hezbollah commander, retaliating for a rocket strike that resulted in 12 deaths in the Israel-occupied Golan Heights. This attack followed Prime Minister Benjamin Netanyahu’s warning of a “harsh” response.

Although the ongoing Israel-Hamas conflict, now in its ninth month, poses potential supply risks for crude, there have been minimal disruptions in oil production in the region so far.

OPEC Meeting, US Inventories Due

Market caution before the upcoming Organization of Petroleum Exporting Countries (OPEC) meeting set for Thursday weighed on sentiment, even as many analysts anticipate the cartel will likely downplay any intention to reduce production cuts.

Support could potentially arise from expected U.S. inventory reports due this week, which are projected to show a decrease in crude and fuel stocks.

Macquarie added, “Despite the recent pullback, it would not surprise us if prices find support from summer draws through the end of August before beginning a multimonth pullback due to large 4Q24 surpluses.”

*(Peter Nurse, Ambar Warrick contributed to this article.)