Oil prices down on China demand concerns

ISTANBUL

Oil prices decreased on Tuesday due to demand concerns in China, the world's largest oil importer, while worry over supply eased in the Middle East.

International benchmark Brent crude traded at $78.79 per barrel at 10.42 a.m. local time (0742GMT), a drop of 0.33% from the closing price of $79.05 per barrel in the previous trading session.

The American benchmark West Texas Intermediate (WTI) traded at $75.56 per barrel at the same time, a 0.33% fall from the previous session that closed at $75.81 per barrel.

Prices continue to be depressed by demand concerns in China as it grapples with a slowdown in economic recovery.

The gross domestic product (GDP) of China rose by 4.7% in the second quarter of 2024, below market expectations, according to official data, which followed figures showing a softness in oil imports.

Although the country unexpectedly lowered a key short-term policy rate and benchmark lending rates last week to boost the economy, investors' sentiment surrounding Chinese markets remained weak.

Uncertainty over the country's oil demand fuels market players' fear that imports and refining activity could also remain low.

Meanwhile, market players disregarded the risk premium from prices amid a lack of immediate escalation in tension in the Middle East.

White House National Security Council spokesman John Kirby on Monday said concerns of an all-out war in the Middle East are "exaggerated" and diplomatic conversations continue to reduce tensions between Israel and Lebanese group Hezbollah after a deadly attack in the occupied Golan Heights.

While the exchange of border fire between Israel and Hezbollah continues, fears of an all-out war have recently grown, especially after Saturday's attack in the town of Majdal Shams that killed 12 people.

The escalation comes against the backdrop of a deadly Israeli onslaught on Gaza which resulted in the death of more than 39,300 people since last October.

Meanwhile, market players will be watching the US Federal Reserve's (Fed) meetings to gauge the oil market trajectory.

Fed will review its policy on July 30-31. While investors expect the bank to keep rates unchanged, they will also look for further evidence that a rate cut will happen at the September meeting.

Experts believe that reducing policy interest rates soon would support economic activity in the country, resulting in higher oil demand.