- Oil Prices Fall on Weak Global Economic Data
Global oil prices declined on Wednesday after Chinese economic data showed unexpected weakness in the month of July.
China reported a 17-year low industrial output for the month of July to further highlight the effect of the trade war on the world’s second-largest economy and the world’s largest importer of crude oil.
The report weighed on commodity outlook as investors are now projecting further fall in prices except an agreement is reached between the two world’s largest economies.
Another factor that weighed on prices was the rise in U.S crude inventories.
The American Petroleum Institute (API) reported that the U.S crude inventories rose by 3.7 million barrels to 443 million last week, more than the 2.8 million decline projected by most experts.
This was after the U.S President Donald Trump backed down from raising tariffs by 10 percent on $300 billion worth of Chinese imports by the 1st of September.
The Brent crude oil, against which Nigerian oil is measured, declined by 3.4 percent to $59.19 a barrel, erasing 4.7 percent gain recorded on Tuesday. While the U.S West Texas Intermediate (WTI) oil dipped by 3.75 percent to $54.96 per barrel.
“Oil is giving up most of Tuesday’s gain as it was reminded of economic realities with Chinas industrial output falling to a 17-year low,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.
“Yesterday and today’s price action goes to show just how focused and twitchy the oil market is on current and future economic conditions these days and far less so on supply-side developments.”
Global economic uncertainty due to the weak data from China and rising inventories are the two factors that plunged prices on Wednesday despite recording the biggest gain since December on Tuesday.