Oil prices fell in Asian trade on Tuesday as concerns over weak economic data from China and expectations of a U.S. interest rate hike weighed on the market.
Brent crude, against which Nigerian crude oil is priced, was down by 0.3% at $79.07 a barrel while U.S. West Texas Intermediate (WTI) crude fell 0.3% to $75.41 a barrel, with both benchmarks falling by over $1 in their last session.
According to analysts, the weak economic recovery in China is clouding the demand outlook on fuel consumption.
China’s manufacturing activity unexpectedly fell in April, showing the first contraction since December in the manufacturing purchasing managers’ index.
The industrial and economic recovery from the coronavirus pandemic was expected to boost demand this year.
Despite China’s weak manufacturing data, there are positive signs of recovery based on spending during the recent five-day Labor Day holiday in the world’s largest oil importer, with major retail and catering companies seeing a 21% jump in sales year-on-year, based on Ministry of Commerce data.
A record 19.7 million railway trips were also made across the country, and traffic is expected to be 20% higher than in 2019, according to local media.
Meanwhile, a Monday poll showed that U.S. crude oil stockpiles are expected to have fallen for a third consecutive week, providing some support to the market.
The poll was conducted ahead of reports from the American Petroleum Institute, an industry group, due on Tuesday, and the Energy Information Administration, due on Wednesday.
However, the U.S. Federal Reserve is expected to increase interest rates by another 25 basis points, which could impact oil by slowing economic growth and denting energy demand.
Banking fears have also weighed on oil in recent weeks, with the seizure of First Republic Bank over the weekend by U.S. regulators, ahead of a deal in which JPMorgan bought most of its assets.
Oil prices are likely to remain under pressure in the near term, with market participants closely watching for any further developments that may impact demand and supply dynamics.