Oil Prices Dip on Weak Global Economic Data
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Oil prices fell to a one-week low on Tuesday as disappointing economic news from Germany and China dampened demand prospects, reports Reuters. Investors also remained cautious ahead of a Federal Reserve interest rate decision.
Brent crude futures fell 1% to settle at $73.19 a barrel, while US West Texas Intermediate (WTI) crude slipped 0.9% to $70.08 a barrel. This marked the lowest close for Brent since December 10, narrowing the premium of Brent over WTI to a 12-week low of $3.54 a barrel. Analysts note that when this premium falls below $4, it becomes less economically viable for firms to ship US crude, potentially leading to lower US exports.
In China, the world's second-largest economy, industrial output growth edged higher in November, but retail sales disappointed, reinforcing calls for Beijing to implement consumer-focused stimulus measures. This comes as policymakers brace for potential new US tariffs under President-elect Donald Trump's second term.
Meanwhile, in Germany, business morale worsened more than expected in December, according to the Ifo Institute. The survey cited geopolitical uncertainty and an industrial slump in Europe's largest economy as contributing factors.
"The only good thing about Germany’s just-released Ifo index is that it is the final major macro indicator released this year," analysts at ING Bank noted in a statement.
In the US, retail sales rose more than anticipated in November, driven by increased motor vehicle and online purchases. However, this data is unlikely to alter expectations that the Fed will cut interest rates on Wednesday for the third time since September. Investors will scrutinize the Fed's forecasts for clues regarding future policy adjustments in light of continued economic resilience and persistent inflation.
The Fed's rate cuts aim to reduce borrowing costs, potentially stimulating economic growth and oil demand.
In the US, oil storage data is expected to be released by the American Petroleum Institute on Tuesday and the US Energy Information Administration on Wednesday. Analysts predict that US energy firms removed approximately 1.6 million barrels of crude from storage during the week ending December 13. If confirmed, this would mark the fourth consecutive week of oil withdrawals since August.