👀 Ones to watch: The MOST undervalued shares to buy right nowSee Undervalued Shares

Oil prices fall on China economic growth fears, stronger dollar

Published 14/08/2023, 03:08
© Reuters.
LCO
-
CL
-
DXY
-

Investing.com -- Crude oil prices retreated Monday, pressured by renewed concerns over China’s economic recovery as well as a stronger U.S. dollar.

By 09:10 ET (13.10 GMT), the U.S. crude futures traded 1.1% lower at $82.30 a barrel, while the Brent contract dropped 1% to $85.95. 

Property woes slow China’s economic recovery

Chinese residential real estate giant Country Garden (HK:2007) suspended trading in more than ten of its onshore bonds on Monday, sparking a sell-off in the company's Hong Kong-listed shares given the signs of stress in the country's ailing property sector.

This is another headwind slowing the recovery of the Chinese economy from its COVID hit, an economy that was meant to be the source of the majority of crude demand growth this year given the aggressive monetary tightening that many of the western economies were struggling with.

China is the second largest economy in the world, and is also the largest importer of crude.   

While government officials have promised to roll out more stimulus measures to support growth, they have provided few actual details on how said stimulus will be unlocked.

The focus this week is now on retail sales and industrial production data, due on Tuesday. Both readings are expected to have declined further in July.

Dollar strength hitting crude

The strength of the U.S. dollar is also hurting the oil markets, with the greenback sitting at a five-week high after last week’s inflation readings provided more ammunition for the Federal Reserve to keep interest rates higher for longer.

A stronger dollar makes commodities priced in the greenback, like crude, more expensive, likely hitting demand among international buyers.

Seven consecutive positive weeks

All that said, the oil markets have just registered seven weeks of gains on tightening supply after output cuts from primarily Saudi Arabia and Russia, under the umbrella of lower production targets by the Organization of Petroleum Exporting Countries and its allies, a group known as OPEC+.

“Sentiment remains largely positive with the oil balance set to continue to tighten, while stronger refinery margins are also providing some support,” analysts at ING said, in a note.

That sentiment could be changing, though, as speculators have become reluctant to add to their positions, reducing their net long positions in Brent over the last reporting week.

This suggests the market could now be in an overbought situation, with a correction possible in the coming days.

(Ambar Warrick contributed to this article.)

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.