Oil prices edged lower on Tuesday as investor sentiment was dampened by concerns over China’s latest economic stimulus package and potential oversupply. The stronger US dollar also exerted downward pressure on the commodity.
Brent crude futures declined 0.2 per cent to $71.66 a barrel, while US West Texas Intermediate (WTI) crude futures fell 0.3 per cent to $67.84 a barrel. Both benchmarks had experienced significant losses in the previous two trading sessions.
China’s announcement of a 10-trillion-yuan ($1.4-trillion) debt package to support local governments was met with disappointment by analysts, who argued that it was insufficient to significantly boost economic growth.
Coupled with concerns over weakening demand in China, as evidenced by recent data on consumer and producer prices, the outlook for oil consumption in the world’s largest oil importer remains uncertain.
The strengthening US dollar, which is expected to benefit from higher interest rates, further weighed on oil prices. A stronger dollar makes commodities priced in US dollars more expensive for buyers using other currencies, thereby reducing demand.
Market participants are now turning their attention to upcoming reports from OPEC, the International Energy Agency, and the Energy Information Administration. Any downward revisions to global oil demand forecasts, particularly from OPEC, could further dampen market sentiment.
The Organisation of the Petroleum Exporting Countries (OPEC) is scheduled to release its monthly oil market report later today. Market analysts believe that any indication from OPEC+ of prioritising market share over higher oil prices could lead to a decline in oil prices.
As the week progresses, investors will be closely monitoring US inflation data and statements from Federal Reserve officials for further clues on the future trajectory of interest rates.
Attribution: Reuters
Subediting: M. S. Salama