Oil futures slumped early Tuesday, reaching their lowest intraday levels since early August. The U.S. benchmark dipped below the $80-a-barrel threshold after mixed China data raised concerns about demand.
Price Action
- West Texas Intermediate crude for December delivery fell $1.34, or 1.7%, to $79.48 a barrel on the New York Mercantile Exchange.
- January Brent crude, the global benchmark, dropped $1.53, or 1.8%, to $83.65 a barrel on ICE Futures Europe.
Market Drivers
Oil traders have completely wiped out the risk premium that was factored into crude following the Hamas attack on southern Israel. Initially, crude prices had rallied after the attack on October 7 due to fears that the Israel-Hamas war could spread throughout the region, posing a threat to Middle Eastern crude flows and supplies.
However, attention has now shifted back to the demand side. Analysts attribute Tuesday's slump to China trade data. According to news reports, China imported 13.52% more crude in October compared to the previous year. However, this figure was inflated by coronavirus restrictions that were in place in 2022.
Carsten Fritsch, commodities analyst at Commerzbank, highlighted that although imports in October were slightly higher than September, they remained around 1 million barrels a day below levels seen in the summer. Fritsch emphasized that this is disappointing considering the record-high processing. He stated, "Crude oil imports in the first ten months were a good 14% up year-on-year. The increase appears bigger because of the low basis for comparison, however, as imports were dampened by the coronavirus restrictions last year." Consequently, these figures are providing no support to prices today.
Oil traders continue to monitor the evolving situation closely amidst concerns about future demand and its impact on prices.
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