Oil prices fall due to concerns about Chinese demand

By Arathy Somasekhar

(Reuters) – Oil prices fell on Tuesday on concerns that China’s slowing economy could hurt demand, despite growing consensus that the U.S. Federal Reserve will begin cutting its benchmark interest rate as soon as September. have limited falls.

Brent futures were down 9 cents, or 0.1%, at $84.76 a barrel by 12:21 GMT, while U.S. West Texas Intermediate (WTI) crude fell 13 cents, or 0.2%, to U.S. $81.78.

China’s economy grew much more slowly than expected in the second quarter, hurt by a prolonged housing recession and job insecurity.

The world’s second-largest economy grew 4.7% between April and June, official data showed, the slowest pace since the first quarter of 2023 and below the 5.1% forecast in a Reuters poll. It also slowed down from the previous quarter’s 5.3% expansion.

China’s refinery output fell 3.7% in June from a year earlier, official data showed on Monday, falling for a third month, partly due to planned maintenance, while lower processing margins and weak demand for fuel led independent factories to reduce production.

Meanwhile, Fed Chairman Jerome Powell said Monday that the three U.S. inflation readings during the second quarter of this year “increase some confidence” that the pace of price increases is returning to the Fed’s target. central bank sustainably, market participants note interpreted as indicating a turn towards interest rate cuts may not be far away.

Lower interest rates lower the cost of borrowing, which can boost economic activity and oil demand.

On the supply side, Houthi fighters in Yemen – in response to Israel’s bombing of Gaza – attacked three ships, including an oil tanker, in the Red and Mediterranean Seas with ballistic missiles, drones and booby-trapped boats, they said on Monday.

Although the crisis in the Middle East has not affected supplies, attacks on ships in the Red Sea have forced ships to take longer routes, meaning oil stays in the water for longer.

Elsewhere, Russian Deputy Prime Minister Alexander Novak said on Monday that the global oil market will be balanced in the second half of the year and beyond due to a production agreement between the Organization of Petroleum Exporting Countries and the its allies, known collectively as OPEC+.

(Reporting by Arathy Somasekhar; Editing by Christopher Cushing)