Oil prices steady as China’s weak data sparks demand concerns

Oil prices stabilized after a recent decline, driven by weak economic data from China that fueled concerns over softening demand in the world’s largest crude importer.

West Texas Intermediate (WTI) crude hovered below $71 per barrel after slipping 0.8% on Monday, while Brent crude closed near $74.

Fresh data from China on Monday revealed a slowdown in refinery activity and weaker retail sales, even as Chinese leadership hinted at stronger stimulus to revive domestic demand. However, analysts suggest Beijing's recent measures may fall short of the bold actions needed to counter the economic slowdown.

Oil markets are now poised to end 2024 with a slight decline, as expectations of oversupply and China’s economic challenges overshadow escalating geopolitical tensions in Russia and the Middle East.

Meanwhile, European nations are expected to tighten restrictions on tankers carrying Russian crude, and the United States has signaled a possible reduction in the Russian oil price cap to further limit Moscow’s war funding capabilities.

Private Chinese refiners have rushed to secure significant volumes of crude from the Middle East and Africa as Iranian supply dwindles and prices climb. Chris Weston, Head of Research at Pepperstone Group, told Bloomberg:

“I’m surprised oil hasn’t tested the $71 level or reached its multi-month lows,” referencing Brent crude. He added: “The current flow of news keeps traders in a sell-the-rally mindset, favoring caution during price upticks.”

Oil prices have also been trading within a narrow range, with shrinking supply and demand spreads pushing 30-day historical volatility to its lowest levels since August.

Looking ahead, the U.S. Federal Reserve is expected to announce another interest rate cut during its meeting on Wednesday, potentially paving the way for China’s central bank to follow suit with monetary easing to support its faltering economy.