By
Godfrey Benjamin
October 13th, 2023
The decline in oil prices followed the release of China’s mixed economic data. This data countered the impact of oil production cuts by Saudi Arabia and Russia.
US crude oil prices dipped below $78 per barrel on Tuesday, marking their lowest level since July. This decline was driven by sluggish global economic data, which took precedence over concerns regarding the potential escalation of the Israel-Hamas situation into a broader regional conflict.
West Texas Intermediate (WTI) crude oil decreased by $3.45 or 4.3%, closing at $77.37 per barrel. Similarly, Brent crude oil saw a drop of $3.57 or 4.2%, settling at $81.61 per barrel, with both prices hitting their lowest points since July.
The decline in oil prices followed the release of China’s mixed economic data. In October, Beijing’s crude oil imports increased in both volume and value, but the country’s overall exports experienced a more significant drop than anticipated, suggesting a slowdown in global demand.
China, the world’s second-largest economy, reported a 6.4% decrease in exports in US dollar terms for October compared to the same period in the previous year. This figure was worse than the 3.3% decline predicted by a Reuters poll. China’s exports have now declined for six consecutive months, attributed in part to higher interest rates, which have exerted downward pressure on the global economy.
Minneapolis Federal Reserve President Neel Kashkari tempered expectations on Tuesday regarding the possibility of the US central bank cutting interest rates. In an interview with Bloomberg, Kashkari said:
“We have to get inflation back down to 2% over a reasonable period of time. Ultimately, the economy will tell us how much is needed to get there, and I just don’t know.”
China Offsets Oil Cuts by Saudi and Russia
Data from China countered the impact of oil production cuts by Saudi Arabia and Russia, which had pushed oil prices higher earlier in the week. Both Riyadh and Moscow confirmed on Sunday that they would maintain these production cuts until at least the year’s end.
Oil prices had surged during the week following a series of devastating terrorist attacks in Israel, raising concerns that the ongoing war could escalate into a more extensive regional conflict that might disrupt oil supplies.
However, prices have declined since mid-October as immediate-term concerns of the conflict spreading have subsided. As said, the decline in oil prices came on the heels of mixed economic data from China.
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