Oil Prices Fall due to Weak Chinese Spending Data
OIL & GAS

Oil Prices Fall due to Weak Chinese Spending Data

Oil futures declined from their highest levels in weeks, pressured by weaker-than-expected consumer spending in China, the world’s largest oil importer.

Brent crude futures fell by 60 cents, or 0.81 per cent, to $73.89 a barrel by 1043 GMT, after closing at their highest level since November 22 on Friday. US West Texas Intermediate crude dropped by 70 cents, or 0.98 per cent, to $70.59 after recording its highest close since November 7 in the previous session.

While Chinese industrial output growth slightly accelerated in November, retail sales were weaker than expected, which placed additional pressure on Beijing to ramp up stimulus measures for a fragile economy affected by US trade tariffs under a second Trump administration.

UBS analyst Giovanni Staunovo explained that the weaker-than-expected Chinese economic data was affecting crude prices, as market participants were still waiting to understand how Chinese officials would stimulate the economy. The outlook for China also influenced the decision by the oil producer group OPEC+ to postpone plans for higher output until April.

John Evans from oil broker PVM remarked that despite the stimulus being deployed, consumers were not responding to it. He noted that without a significant change in personal spending behaviour, China’s economic prospects would remain limited.

Traders were also taking profits while awaiting the U.S. Federal Reserve’s decision on interest rates later in the week. IG market analyst Tony Sycamore mentioned that light profit-taking was expected after a more than 6 per cent jump in prices the previous week. He added that many banks and funds likely closed their books due to reduced appetite for positions during the holiday season.

The Federal Reserve is expected to cut interest rates by a quarter percentage point at its December 17-18 meeting, which will also offer an updated forecast on further rate reductions in 2025 and possibly into 2026. Lower interest rates can stimulate economic growth and boost oil demand.

Oil price declines were also limited by concerns over potential supply disruptions, such as further US sanctions against Russia and Iran. US Treasury Secretary Janet Yellen told Reuters that the US is considering additional sanctions targeting “dark fleet” tankers and could focus on Chinese banks to limit oil revenue funding Russia’s on-going war in Ukraine. Fresh US sanctions on entities trading Iranian oil are already driving the price of crude sold to China to its highest levels in years, with the incoming Trump administration expected to increase pressure on Iran.

Oil futures declined from their highest levels in weeks, pressured by weaker-than-expected consumer spending in China, the world’s largest oil importer.Brent crude futures fell by 60 cents, or 0.81 per cent, to $73.89 a barrel by 1043 GMT, after closing at their highest level since November 22 on Friday. US West Texas Intermediate crude dropped by 70 cents, or 0.98 per cent, to $70.59 after recording its highest close since November 7 in the previous session.While Chinese industrial output growth slightly accelerated in November, retail sales were weaker than expected, which placed additional pressure on Beijing to ramp up stimulus measures for a fragile economy affected by US trade tariffs under a second Trump administration.UBS analyst Giovanni Staunovo explained that the weaker-than-expected Chinese economic data was affecting crude prices, as market participants were still waiting to understand how Chinese officials would stimulate the economy. The outlook for China also influenced the decision by the oil producer group OPEC+ to postpone plans for higher output until April.John Evans from oil broker PVM remarked that despite the stimulus being deployed, consumers were not responding to it. He noted that without a significant change in personal spending behaviour, China’s economic prospects would remain limited.Traders were also taking profits while awaiting the U.S. Federal Reserve’s decision on interest rates later in the week. IG market analyst Tony Sycamore mentioned that light profit-taking was expected after a more than 6 per cent jump in prices the previous week. He added that many banks and funds likely closed their books due to reduced appetite for positions during the holiday season.The Federal Reserve is expected to cut interest rates by a quarter percentage point at its December 17-18 meeting, which will also offer an updated forecast on further rate reductions in 2025 and possibly into 2026. Lower interest rates can stimulate economic growth and boost oil demand.Oil price declines were also limited by concerns over potential supply disruptions, such as further US sanctions against Russia and Iran. US Treasury Secretary Janet Yellen told Reuters that the US is considering additional sanctions targeting “dark fleet” tankers and could focus on Chinese banks to limit oil revenue funding Russia’s on-going war in Ukraine. Fresh US sanctions on entities trading Iranian oil are already driving the price of crude sold to China to its highest levels in years, with the incoming Trump administration expected to increase pressure on Iran.

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