The oil market is once again in turmoil, with crude prices experiencing a notable drop. On August 19, oil prices suffered heavy losses, weighed down by concerns over weak demand from China, the world's largest crude oil importer, Reuters reported. This in turn dampened market sentiment and raised concerns about potential supply disruptions.
Brent crude futures fell by 45 cents, or 0.56%, to $79.23 per barrel. Meanwhile, West Texas Intermediate (WTI) futures dropped by 58 cents, or 0.76%, to settle at $76.07 per barrel.
On August 16, both crude benchmarks dipped by 2% as investors tempered their expectations for Chinese demand growth. Nevertheless, oil prices ended the week largely unchanged after US data signaled slowing inflation and steady retail spending.
"Persistent concerns about slow demand in China led to a sell-off," Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, said. At the same time, he noted that geopolitical tensions in the Middle East and the escalation of the Russian-Ukraine conflict, which pose supply risks, continue to provide some support to the market.
Recent reports indicated a sharp decline in diesel and gasoline exports from China in July, reflecting reduced crude oil processing due to lower profitability.
In addition, the latest macroeconomic data revealed a loss of momentum in the Chinese economy, with new home prices falling at the fastest pace in nine years, industrial production slowing, and unemployment rising.
This situation is a source of concern for market participants. Analysts and traders point to lower demand from China, noting that refineries sharply reduced crude processing rates in July. The primary issue appears to be a marked decline in fuel demand, experts conclude.