A VLCC oil tanker is seen at the crude oil terminal in Ningbo Zhoushan Port, Zhejiang Province, China on May 16, 2017. Picture taken on May 16, 2017. REUTERS/Stringer/File Photo Get license rights
NEW YORK, Aug 15 (Reuters) – Oil prices fell more than 1% on Tuesday on lackluster Chinese economic data and fears that Beijing’s unexpected cut in key policy rates was not substantial enough to revive the country’s post-pandemic recovery.
Brent crude fell $1.32, or 1.5%, to $84.89 a barrel, while US West Texas Intermediate crude fell $1.52, or 1.8%, to $80.99.
Supply cuts by Saudi Arabia and Russia, part of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, the OPEC+ group, have helped boost prices over the past seven weeks.
Both U.S. crude futures and Brent have been holding their breath for two straight sessions, said Andrew Libo, president of Libo Oil Associates in Houston.
Weighing on sentiment, China’s industrial production and retail sales data on Tuesday showed the economy slowed further last month, intensifying pressure on already slowing growth and prompting authorities to cut key policy rates to boost economic activity.
When the oil market looks comfortable, China is on top, throwing a wet blanket over those dreaming of prices north of $90, said John Evans of oil broker PVM. China is the world’s largest oil importer.
China’s central bank cut interest rates somewhat after data highlighted intense pressure on the economy, mainly from the property sector, although analysts said the cut was too small to make a meaningful difference.
There are concerns that China may struggle to meet its growth target of 5% for the year without more fiscal stimulus.
Barclays on Tuesday cut its forecast for China’s GDP growth to 4.5% in 2023, citing a faster-than-expected decline in the housing market.
Adding to the sense of risk-off, an analyst at Fitch Ratings warned that U.S. banks including JPMorgan Chase ( JPM.N ) could be downgraded if the operating environment for the industry is further downgraded. CNBC on Tuesday.
„When the banking sector shakes, oil shakes because it’s very sensitive to interest rates, credit and the general health of the economy,” said Bill Flynn, analyst at Price Futures Group.
On a brighter note, refinery output in China rose 17.4% in July from a year earlier, as refiners boosted production to meet demand for domestic summer travel and gain higher regional profit margins by exporting fuel.
Investors are now awaiting data on US crude oil inventories. Seven analysts polled by Reuters estimated that average crude inventories fell by about 2.3 million barrels in the week to Aug. 11.
An industrial report will be released later on Tuesday, and US government data is due on Wednesday.
Reporting by Stephanie Kelly; additional transfers by Natalie Grover, Muyu Xu and Katya Golubkova; Editing by Thomas Janowski, David Goodman, Emilia Sichtol-Madaris, and Deepa Babington
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