Mar 5 2024: For the second consecutive day, oil prices experienced a decline on Tuesday, as China’s commitments to revamp its economy amidst sluggish growth since the COVID pandemic failed to generate enthusiasm among investors concerned about weakening consumption.
Brent futures for May slipped by 16 cents, or 0.2%, to $82.64 per barrel by 0301 GMT, while U.S. West Texas Intermediate (WTI) dropped by 28 cents, or 0.4%, to $78.46. Brent was poised to register its fifth consecutive session of decline on Tuesday.
China announced intentions to “transform” its economic development model and address industrial overcapacity, while setting an economic growth target for 2024 at around 5%, similar to last year’s goal and aligning with analysts’ projections.
However, analysts noted that achieving this target, which could potentially boost fuel consumption, might prove challenging this year. China had benefited in 2023 from the favorable base effect of a COVID-impacted 2022, potentially dampening investor sentiment.
As the world’s largest crude importer, China also committed to intensifying exploration and development of oil and natural gas resources, while simultaneously pledging to tighten control over fossil fuel consumption.
While apprehensions regarding the outlook for Chinese demand weighed on prices, factors related to supply, including output reductions by major producers and geopolitical tensions stemming from the Israel-Gaza conflict, supported crude prices.
Over the weekend, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) extended their voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter to bolster prices amidst global growth concerns and increased output from non-OPEC nations.
Meanwhile, preliminary data from a Reuters poll on Monday suggested that U.S. crude oil inventories were expected to have risen by approximately 2.6 million barrels last week, with forecasts indicating lower levels for distillates and gasoline stockpiles.
“The market has been trending higher in recent weeks due to improving fundamentals. Increasing spot prices indicate that the physical market has begun to tighten amid various other disruptions on the supply side,” noted analysts at ANZ in a Monday report.
