Brent crude oil, a global benchmark for Nigerian oil, lost $4.34 from the $97.23 a barrel it traded in the early hours of Monday during the Asian trading session to $92.89 as of 3:30 pm Nigerian time.
Brent oil declined on Monday after the People’s Bank of China (PBoC) unexpectedly cut key interest rates for the second time this year to try a revive credit demand and stimulate growth to ease the impact of COVID-19 on the economy.
Chinese central bank announced it was reducing the interest rate on 400 billion yuan or $59.33 billion of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points (bps) to 2.75%, from 2.85%.
“The rate cut surprises us,” said Xing Zhaopeng, senior China strategist at ANZ. “It should be a response to the weak credit data on Friday. The government remains cautious about growth and will not let go.”
The announcement was after data showed economic productivity was declining across the key sectors of the world’s second-largest economy.
This coupled with the fact that China has started curbing power consumption in the Southwestern regions, suggested an extended slowdown in demand
This slowdown means that China, the world’s largest importer of crude oil, will cut crude oil imports until the economy starts showing signs of improvement.
“The short- to medium-term trends for oil is down at present … oil prices are reflecting the diminishing economic growth outlook right now as key demand-side regions such as the U.S. and China have shown signs of negative (U.S.) and slowing (China) growth,” said Shaun Murison, Senior Market Analyst at foreign exchange trading provider IG.