China's Woes Dominate Trading Fears, Oil Takes Another Nosedive

The commodity may remain rudderless until the U.S. Fed decides whether to cut rates: File Image/Pixabay

Oil traders hyper-sensitive to  any kind of news involving demand made their second about-face in the space of two sessions on Friday, now swayed by demand concerns in China.

Data from that country showed an economy that had lost momentum in July, with new home prices falling at the fastest pace in nine years, industrial output slowing, and unemployment rising.

China's woes were also the reason the Organization of the Petroleum Exporting Countries earlier this week cut its 2024 and 2025 demand forecast.

Oil traders who in the previous session caused prices to rise based on strong U.S. economic data caused Brent on Friday to settle down $1.36, or 1.7 percent, at $79.68 per barrel; West Texas Intermediate settled down $1.51, or 1.9 percent, to $76.65.

Andrew Lipow, president of Lipow Oil Associates, said, "It has been a volatile week in oil markets: on one hand you had fears of supply disruptions from a wider Middle East war, but on the other, slowing growth in China forced revisions of demand forecasts."

Independent oil analyst Gaurav Sharma mused that oil prices would most likely be rudderless until the U.S. Federal Reserve decides whether to cut interest rates at its September meeting.

As for the influence of Middle East tensions, Bloomberg noted that "Traders had been pricing bigger premiums for bullish calls in options markets as tensions remain high in the Middle East, but some of that move has also faded in recent days," and the news agency added that "Disruptions to supply in Libya have also so far done little to support futures prices."

For the record, two diplomats told American media that Qatar's prime minister told Iran's leaders after the first day of Gaza cease-fire talks that they should de-escalate, warning of the consequences of attacking Israel when progress in the talks is supposedly being made.

In other oil news on Friday, the latest monthly data of Russian fossil fuel exports by the Centre for Research on Energy and Clean Air (CREA) showed that India imported $42.8 billion worth of crude from the former Soviet Union, making it the second-largest buyer of Russian fossil fuels at 37 percent; China came first at 47 percent.