Chinese economy inspires drop in oil prices

China is one of the world's largest oil consumers and its outlook for the second half of 2024 had boosted the oil market at the beginning of the year. However, recent data indicate that the Chinese market will not meet expectations, reducing demand for the product and consequently its price.

New goals

Despite still being considered the second largest economy in the world, the country's financial sector grew less than experts expected in the second half of the year, reducing production in several sectors, including refineries, which fell by 3.7%.

The recent OPEC+ (Organization of the Petroleum Exporting Countries) agreement, which had stipulated a controlled cut in the supply of the material to better manage prices, left the market calm about the outlook for the end of 2024.

This tranquility was frustrated by new Chinese demand, lowering barrel prices:

• Brent (Crude Oil Grade): down 0.2% to $84.85 a barrel
• West Texas Intermediate (WTI, US-produced crude oil stream): fell 0.4% to $81.91 a barrel.

In addition to the Chinese issue, the market also reacted to concerns about conflicts in the Middle East. Recently, one of the routes for ships carrying oil was attacked, forcing the shipping service to look for other routes, which delayed some deliveries.

China will bring new updates

China is expected to release new information about its next steps next week. Such statements could stabilize the market and provide a more concrete projection for the future.

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“Policymakers are likely to continue issuing special bonds for investment in infrastructure and industry to meet the growth target of around 5% for this year”the Chinese planetary declared according to Pantheon.

According to Giovanni Staunovo, an analyst at UBS, “Chinese data, including refinery operations and oil imports, are not favorable. But demand growth elsewhere is still healthy.”

Experts suggest that supply should still be greater than demand in the second half of 2024.

Featured photo: Petrobrás oil station (reproduction/Petrobrás agency/EPBR)