Oil prices fell on Monday as China’s deflationary trend intensified and uncertainty over the scale of economic stimulus measures dampened the outlook for fuel demand in the world’s largest crude importer.
Brent crude futures dropped 1.1%, or 86 cents, to $78.18 per barrel by 0523 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 1.2%, or 83 cents, to $74.73 per barrel.
Both benchmarks erased last week’s gains, having fallen over $1 per barrel earlier in the session before recovering some ground. Last week, Brent rose 99 cents, while WTI gained $1.18.
Concerns about China’s economic slowdown overshadowed market fears of potential oil supply disruptions due to geopolitical tensions in the Middle East, particularly Israel’s possible retaliation against Iran’s Oct. 1 missile attack. However, the U.S. has advised Israel against targeting Iranian energy infrastructure.
China’s inflation data, released over the weekend, signalled worsening deflationary pressures.
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The consumer price index missed expectations, and the producer price index fell 2.8% year-on-year, marking the steepest decline in six months, according to the National Bureau of Statistics.
“China’s deflationary pressures and weak domestic consumption persist despite aggressive monetary stimulus efforts,” noted Priyanka Sachdeva, an analyst at Phillip Nova.
The lack of specifics on China’s stimulus plans, particularly after a lacklustre briefing by the Chinese finance ministry, further weighed on investor sentiment.
“The fiscal measures needed to counter downside risks to growth are notably absent,” said Tony Sycamore, IG market analyst.
With China’s economic challenges casting a shadow over global oil demand, traders remain cautious amid ongoing uncertainty.
