More Bullish Signs Ignored as China-Obsessed Traders Cause More Losses For Oil

Solid economic numbers from the U.S., Europe, fail to impress: File Image/Pixabay 

The drivers for oil trading on Tuesday were almost exactly the same as those for the previous session, with weak consumer spending in China and investment caution preceding an upcoming U.S. Federal Reserve decision on interest rates contributing to mild losses.

Brent settled down 72 cents at $73.19 per barrel, and West Texas Intermediate settled down 63 cents at $70.08.

While disappointing Chinese retail sales again fuelled bearish sentiment, it's worth noting that vows from Beijing to boost economic stimulus failed to impress investors as it had last week.

They also brushed off solid composite PMI reports in Europe and the U.S., in addition to losing focus on escalating geopolitical tensions between Russia and Ukraine (which took the form of another wave of drone strikes hitting an important fuel storage depot in central Russia).

As for expectations that the Fed will cut interest rates by a quarter of a percentage point, Anh Pharm, analyst at LSEG, said, "A 25 basis point cut has already been priced in by the market, so any surprises (from the Fed meeting) may move the market."

But it's unclear what it would really take to move the market, with a report from the American Petroleum Institute stating that U.S. stockpiles shrank by 4.7 million barrels last week also failing to impress investors (if the number is confirmed by Washington on Wednesday, it would be the fourth straight decline in that country).

Capping Tuesday's trading was a report from Goldman Sachs that spare oil production capacity at the highest quartile in history is weighing on Brent crude prices, and time spreads have looked undervalued since the summer.

The bank also reported that expectations for a large surplus next year are also likely weighing on the deferred time spreads; "Nevertheless, we believe neither currently low inventory levels nor our expected 2025 surplus of 0.37million barrels per day warrant the oversupply priced in the futures curve."