Sep 25 2024: Oil prices edged lower on Wednesday as investors questioned whether China’s latest stimulus measures would be enough to significantly boost the economy and drive fuel demand in the world’s largest crude importer.
At 0700 GMT, Brent crude futures dropped by 19 cents, or 0.25%, to $74.98 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude fell 28 cents, or 0.39%, to $71.28 per barrel.
This decline follows a 1.7% price increase on Tuesday after China announced its most aggressive economic stimulus package since the COVID-19 pandemic, which included interest rate cuts and additional government funding.
However, analysts have expressed concerns that China may need to implement more substantial fiscal measures to truly boost confidence in the world’s second-largest economy. This sentiment dampened the initial boost to oil prices.
“The absence of a more defined fiscal strategy still leaves some uncertainty about whether the economic boost will be sustained,” said Yeap Jun Rong, a market strategist at IG.
Yeap also noted a general lack of momentum in the oil market, with trading volumes lower than usual. This could be partially attributed to a drop in U.S. consumer confidence, which hit its lowest point in three years in September, driven by worries over job availability.
Despite this, falling U.S. crude oil and fuel inventories lent some support to the market. According to the American Petroleum Institute, U.S. oil stockpiles decreased by 4.34 million barrels last week, gasoline inventories declined by 3.44 million barrels, and distillate stocks dropped by 1.12 million barrels.
Geopolitical tensions in the Middle East, particularly the escalating conflict between Iran-backed Hezbollah in Lebanon and Israel, also provided upward pressure on crude prices. Cross-border rocket exchanges have heightened concerns about a potential broader conflict in this key oil-producing region.
Hezbollah confirmed on Wednesday that senior commander Ibrahim Qubaisi had been killed in Israeli airstrikes on the Lebanese capital. Israel earlier stated that Qubaisi led Hezbollah’s missile and rocket forces.
Meanwhile, a hurricane threatening the U.S. Gulf Coast has shifted course toward Florida, reducing the immediate risk to oil and gas production areas in Texas, Louisiana, and Mississippi.
