Oil prices retreated on Tuesday amid concerns over a slowing Chinese economy impacting demand, despite expectations of an upcoming interest rate cut by the U.S. Federal Reserve that could support economic activity.
Brent crude futures declined by 57 cents to $84.28 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 59 cents to $81.32 per barrel by 0630 GMT.
Analysts pointed to weaker-than-expected Chinese economic data, including a 4.7% GDP growth in April-June, the slowest since early 2023, as a factor dampening optimism about oil demand from the world’s second-largest economy.
IG market strategist Yeap Jun Rong highlighted concerns that market participants might have been too optimistic about Chinese oil demand, given the economic slowdown and uncertainties surrounding stimulus measures from Beijing.
Meanwhile, in the U.S., Federal Reserve Chair Jerome Powell’s remarks indicating confidence in inflation trends suggested potential interest rate cuts, which typically lower borrowing costs and stimulate economic growth, including oil demand.
However, analysts cautioned against overly bullish expectations due to anticipated weakness in U.S. macroeconomic data, such as June’s retail sales figures, which could indirectly impact oil demand in the short term. OANDA senior market analyst Kelvin Wong noted that these macroeconomic factors could cap oil prices below $85 per barrel for WTI crude in the near term.