Oil Prices Dip as Soft Chinese Spending Dampens Demand
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Oil prices retreated from multi-week highs on Monday, as weaker-than-expected consumer spending in China and anticipation of a US Federal Reserve interest rate decision prompted investors to pause buying, as reported by Reuters.
Brent crude futures fell 45 cents to $74.04 a barrel by midday EST, after reaching their highest point since November 22nd on Friday. US West Texas Intermediate crude shed 48 cents to $70.81, following its highest close since November 7th in the previous session.
Last week, oil prices surged on expectations of tighter supply due to additional sanctions on Russian and Iranian producers, coupled with the prospect of lower interest rates in the US and Europe, which could boost demand.
"We feel that last week’s events have been appropriately priced and that this week will be bringing fewer items capable of supporting oil prices," said Jim Ritterbusch of consultancy Ritterbusch and Associates to Reuters.
However, weaker-than-expected Chinese retail sales data has cast a shadow on the near-term outlook for oil demand.
"Risk off following some weaker than expected Chinese economic data is weighing on crude prices. Market participants are still awaiting guidance on how Chinese officials plan to stimulate the economy," said UBS analyst Giovanni Staunovo.
The disappointing Chinese data also contributed to OPEC+'s decision to postpone plans for higher output until April.
"Whatever stimulus is being deployed, consumers are not buying into it; and without a serious sea-change in personal spending behaviour, China's economic fortunes will be stunted," said John Evans at oil broker PVM.
Traders also engaged in profit-taking ahead of the US Federal Reserve's interest rate decision this week, which is expected to involve a quarter-percentage-point cut. Lower interest rates typically stimulate economic growth and increase oil demand.
The US dollar, which tends to move inversely to commodities like crude oil, hovered near a three-week high against other major currencies ahead of the week's central bank meetings, adding further pressure on oil prices.