By Ambar Warrick
Oil prices extended recent losses on Tuesday as markets remained cautious amid signs of weakening Chinese demand, while a slew of dismal economic indicators also brewed concerns over global crude appetite.
Crude prices marked a weak start to the week after data showed China’s crude imports sank 2% in September, amid continued headwinds from COVID-linked restrictions. The country, which is the world’s largest crude importer, increased its oil imports as local fuel demand weakened.
Data also showed that the Chinese economy grew more than expected in the third quarter. But Beijing’s recent commitment to maintaining its zero-COVID policy darkened the outlook for the world’s second-largest economy.
Weaker-than-expected business activity indicators from Japan, the Eurozone and the U.S. also pointed to slowing economic activity in the world’s largest economies, possibly indicating more headwinds for global crude appetite.
London-traded Brent crude oil, the international benchmark, fell 0.3% to $91.22 a barrel by 21:39 ET (01:39 GMT), after plummeting over 2% on Monday. West Texas Intermediate Crude Futures were flat around $84.56 a barrel, recovering slightly from a 0.6% drop in the prior session.
Oil prices logged strong gains last week amid signs that supply is likely to tighten in the coming months, thanks to production cuts by the Organization of Petroleum Exporting Countries and increased restrictions on Russian exports.
But a more pronounced slowdown in global economic growth could potentially offset the price benefits of tightening supply.
Oil prices have fallen sharply from annual highs this year on concerns that rising inflation and interest rates will severely dent global demand. The U.S. has also vowed to release more oil from its Strategic Petroleum Reserve to bring down crude prices.
Focus this week now turns to third-quarter economic growth data from the U.S., due on Thursday. The figure will help gauge the full impact of rising interest rates on the world’s largest economy.
A strengthening dollar has also weighed on oil prices in recent months, given that it makes crude imports more expensive.
Still, weak U.S. data on Monday raised expectations that the Federal Reserve will ease its pace of sharp interest rate hikes to prevent economic destruction, a move that is expected to weigh on the dollar and benefit crude prices.