Crude oil prices plunged sharply on Wednesday with the U.S. West Texas Intermediate (WTI) dropped over 2.4% from $81 to $79 a barrel, while the international benchmark Brent crude fell 2.3% from $85 to $83 a barrel.
The decline in oil prices was pressured by China’s economic data that continuously showed signs of slowing down in its economy, which translated to lower oil consumption. The latest major report showed that exports and imports both fell by double digits in July, which was much worse than predicted. Meanwhile, the producer price index dropped by 4.4% in July from last year below 108 points, trending downward from 111 points last year.
Japan’s trade data for July also fueled the downtrend as its main counterpart is China. Exports contracted 0.3% YoY and imports fell 13.50% YoY, causing a trade deficit of $78.7 billion. With core machinery order dropping by 5.8% YoY.
The potential default of Country Garden Holdings’ high-yield bonds also put pressure on the Chinese government to shore up the property sector and also to boost its economy overall.
China’s Premier Li Qiang said earlier this morning that Beijing is working to achieve its growth target of 5% this year despite recent data that showed the economy is slowing down in the world’s second largest economy.
Uncertainties from the Federal Reserve also weighed on oil prices as the market was unsure of the Fed’s next move after the minutes from July’s meeting that published on Wednesday showed that the central bank remained cautious and was open to more hikes even while some members believed that more hikes would be unnecessary.
Major economic data yesterday showed that inflation in the United Kingdom rose at a slower rate in July, but core consumer price further caused the Bank of England to consider a tough decision.
Consumer price index rose to an annual 6.8% in July, according to the official data released on Wednesday. A drop in price was in line with the market forecast that saw inflation dropping to 6.8%. However, it was a sharp drop compared to 7.9% in June.
Still, core inflation, which excludes the volatile energy and food prices, maintained at 6.9%, unchanged from last month. This causes the Bank of England to make a tough decision as to end the cycle or continue raising rates.
Despite the recent plummet in crude oil prices more than 4% since its previous peak on August 9, earlier report from the U.S. Energy Information Administration (EIA) pointed out that global oil demand is expected to rise by 2.2 million bpd in 2023 to 102.2 million bpd, with 70% of the growth coming from China.
