Brent fell $1.31, or 1.5 percent, to $84.90 a barrel by 14:56 GMT, while West Texas Intermediate fell $1.44, or 1.8 percent to $81.07. File Image / Pixabay
Continued hand wringing over the state of China's economy was said to be the driving factor in another session of oil losses on Tuesday, this time by around 1.5 percent.
Brent fell $1.31, or 1.5 percent, to $84.90 a barrel by 14:56 GMT, while West Texas Intermediate fell $1.44, or 1.8 percent to $81.07.
The trigger this time out was news that China's industrial output and retail sales data showed the economy slowed further last month, which in turn prompted the country's central bank to lower interest rates marginally; still, it was unclear whether its growth target of about 5 percent for 2023 without more fiscal stimulus would be achieved.
Good news from China was relatively ignored: refinery throughput rose in July 17.4 percent from a year earlier, with output elevated in order to meet demand for domestic summer travel.
there continued to be signs that a tight global market may inspire bullish sentiment in the months ahead
Not helping Tuesday's trading sentiment was a Fitch Ratings analyst warning that U.S. banks could be downgraded if the agency further cuts its assessment of the operating environment for the industry, and this inspired Phil Flynn, senior market analyst at Price Futures Group Inc., to remark, "When the banking sector is shaky, oil gets shakier because it is so sensitive to interest rates, loans and the general health of the economy."
Still, there continued to be signs that a tight global market may inspire bullish sentiment in the months ahead: Enverus disclosed in its latest report that the steep drop in output from U.S. shale wells is worse than expected, with the rate of well production in the Midland area declining by 0.5 percent each year since 2014 (production at the nearby Delaware region has fallen by even more).
Dane Gregoris, managing director at Enverus Intelligence Research, stated, "Summed up, the industry's treadmill is speeding up and this will make production growth more difficult than it was in the past."
So, given that global oil consumption climbed to an all-time high of 103 million barrels per day in June and supplies everywhere are shrinking, why hasn't Brent cracked this year's peak of $89 per barrel?
That was a question posed by Bloomberg on Tuesday, and the news agency went on to include Iran restoring production to a five year high of 3 million bpd a day while it aims for renewed talks with Washington for a renewed nuclear pact as one reason.
But Bloomberg agreed that China was the biggest barrier for oil bulls and pointed out that "analysts now warn that fuel consumption in the Asian giant may have already peaked for this year."