Oil prices fell sharply on Monday, dropping more than $1 a barrel in early trading, driven by weak Chinese inflation data and ongoing uncertainty surrounding Beijing’s economic stimulus measures. This decline has raised concerns about future demand in the global oil market.
Brent crude futures fell by $1.26, or 1.59%, to trade at $77.78 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped $1.20, or 1.59%, to $74.36 per barrel as of 0020 GMT.
The disappointing inflation data from China, the world’s second-largest oil consumer, has compounded fears of a sluggish recovery in demand. China’s consumer price index rose only 0.4%, missing expectations, while the producer price index recorded a steep 2.8% year-on-year drop in September, its fastest decline in six months. This deflationary trend signals weakening demand within China’s economy.
Although Beijing announced plans to ramp up debt issuance to stimulate growth, the lack of specific details has left investors uncertain about the impact of these measures. “The fiscal measures needed to remove downside risks to growth and ignite the animal spirits within Chinese consumers are conspicuous in their absence,” noted Tony Sycamore, an analyst at IG Markets.
Despite these concerns, there is lingering apprehension in the market regarding potential supply disruptions due to the ongoing conflict in the Middle East. However, U.S. officials have cautioned Israel against targeting Iranian energy infrastructure following the missile attack on October 1, minimizing the immediate threat to global oil production.
Last week, both oil benchmarks had posted gains of around 1%, buoyed by fears of supply disruptions in the Middle East and Hurricane Milton’s impact on fuel demand in Florida. While Hurricane Milton briefly boosted gasoline consumption due to evacuations, weak overall demand continues to weigh on the oil market.
Adding to the bearish sentiment, oil giant BP reported a $600 million drop in third-quarter profit on Friday, attributed to weaker refining margins amid a global slowdown in oil consumption.
In light of these factors, oil prices are likely to remain volatile as markets watch for further developments in both Chinese stimulus efforts and geopolitical tensions in the Middle East.
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