July 30 2024: Oil prices fell on Tuesday, continuing the previous session’s decline due to concerns about demand in China, the world’s largest crude importer, while the market remained unconcerned about the risk of escalating conflict in the Middle East.
Brent crude oil futures dropped by 40 cents, or 0.5%, to $79.38 a barrel by 0640 GMT. U.S. crude futures decreased by 43 cents, or 0.6%, to $75.38 a barrel.
Recent disappointing economic news from China has shaken markets. China’s manufacturing activity likely contracted for the third consecutive month in July, according to a Reuters poll on Monday.
Additionally, on Monday, Citi lowered China’s growth forecast to 4.8% from 5% after the country’s second-quarter growth missed analyst expectations, noting that economic activity further weakened in July.
“We believe the market has a stronger downside bias in the short term, weighed by continuing slack domestic demand from China, as well as potential output restoration by some OPEC+ members in Q4,” said Emril Jamil, a senior analyst at LSEG Oil Research, referring to the Organization of the Petroleum Exporting Countries and allies led by Russia.
“Tariff tensions with Europe and the U.S. will also influence Chinese crude demand going forward,” Jamil added.
The market is closely watching an upcoming meeting of China’s top decision-making body, the Politburo, expected this week, which could result in further economic policy support. However, expectations are limited after the Third Plenum, a key policy meeting in mid-July, largely reiterated existing economic policy goals and failed to boost market sentiment.
Oil fell 2% in the previous trading session after Israel indicated that its response to a Hezbollah rocket strike in Israeli-occupied Golan Heights on Saturday would be measured to avoid escalating the Middle East conflict into a full-scale war.
This was reinforced by a U.S. diplomatic effort, reported by Reuters on Monday, to constrain Israel’s response and prevent it from targeting Beirut or any major civilian infrastructure in retaliation.
In Venezuela, the opposition claimed to have won 73% of the vote, despite the national electoral authority declaring incumbent Nicolas Maduro the winner of the election, giving him a third term in office.
“Nicolas Maduro’s victory in the latest Venezuelan election is a headwind for global supply, as this could result in tighter U.S. sanctions,” ANZ analysts said in a note, estimating that this could cut Venezuela’s exports by 100,000-120,000 barrels per day.
Governments in Washington and elsewhere have cast doubt on the results and called for a full vote count, while protesters gathered in towns and cities across Venezuela on Monday.
