Oil futures started the week on a negative note as China's economic growth data fell short of expectations. Here are the key details:
Price Action
- West Texas Intermediate crude for August delivery fell $1.04, or 1.4%, to $74.38 a barrel on the New York Mercantile Exchange.
- September Brent crude, the global benchmark, dropped $1.15, or 1.4%, to $78.72 a barrel on ICE Futures Europe.
- August gasoline fell 1.1% to $2.615 a gallon, while September heating oil shed 1% to $2.572 a gallon.
- September natural gas was up 1.3% at $2.563 per million British thermal units.
Market Drivers
China reported a year-over-year growth rate of 6.3% in the second quarter, missing expectations for 7.1% growth. This led Wall Street analysts to lower their forecasts for China's economy. Disappointment in China's rebound following the lifting of COVID-19 restrictions has contributed to the pressure on oil prices.
Despite this, oil prices have risen for three consecutive weeks. Last week's gains were driven by a weakening U.S. dollar, as expectations grew that the Federal Reserve is nearing the end of its rate hiking cycle. A weaker dollar can support commodity prices by making them more affordable for users of other currencies.
Additionally, supply cuts by Saudi Arabia and Russia have helped buoy crude prices, as the global market is expected to move into a deficit in the second half.
However, there are concerns that signs of slowing in China's broader economy might impact demand in the coming quarters, potentially affecting the bullish outlook for oil, according to Stephen Innes, managing director of SPI Asset Management.
Overall, while oil prices have experienced recent gains, the disappointing Chinese economic growth data has put downward pressure on the market. It remains to be seen how these factors will continue to shape the future of the oil industry.
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