
Oil prices have fallen following the release of a series of economic reports, indicating that China’s demand for crude oil may be slowing.
The economic news included noticeably reduced prices for new homes, gradually increasing unemployment and slowing industrial output. China’s exports of petrol fuel also dropped to 790,000 tons in July, down from 1.22 million tons a year earlier.
All this would indicate that the Chinese economy, and therefore its demand for oil, is not bouncing back as quickly as anticipated. While analysts had been expected a gain in the benchmark prices, the opposite transpired.
Nevertheless, ongoing tensions in the Middle East and Ukraine’s recent incursion into the Russian Kursk region provided some support for oil prices. The president of Nissan Securities’ NS Trading unit, Hiroyuki Kikukawa, said:
“Persistent concerns about slow demand in China led to a sell-off. Still, tensions in the Middle East and the escalation of the Russian-Ukraine war, which pose supply risks, are underpinning the market.”
Kikukawa also said that the US peak driving season was coming to an end, which was also weighing on prices.
While shale oil producers like ExxonMobil, the maker of the Mobil Pegasus gas engine oil, typically have low enough breakeven costs to cover lower oil prices, the downward trend may have consequences for the OPEC+ group, which was planning to wind back some of its cuts from the autumn. Many of the group’s members rely on having relatively high prices to fund infrastructure projects aimed at transforming their economies.