Oil prices were choppy on Thursday after falling over the past three sessions, with the undertone grim on worries that slowing growth in China and possible further U.S. interest rate hikes will weaken fuel demand in the world’s two biggest economies.
Brent crude oil, the international benchmark for Nigerian oil, was flat at $83.45 a barrel in the early hours of Thursday, after initially falling 0.5%. U.S. West Texas Intermediate crude (WTI) was down 8 cents at $79.30.
“China’s economic concerns and broad risk-off sentiment on Wall Street pressed on the oil markets, with a strong USD adding to the downside pressure at the same time,” said Tina Teng, an analyst at CMC Markets.
Traders will closely watch Chinese economic data and government policy moves, in addition to U.S. oil inventory data as oil producers in the country could start increasing output to gain market share amid production cuts by the OPEC+ group, Teng said.
In China, missed payments on investment products by a leading Chinese trust firm and a fall in home prices have added to worries that its deepening property crisis is stifling what little momentum the economy has left.
China’s central bank unexpectedly cut key policy rates for the second time in three months this week but analysts worry it may not be enough to arrest the economy’s downward spiral.
Minutes of the U.S. Federal Reserve’s July meeting released on Wednesday also weighed on oil prices, as they showed that the central bank’s officials did not give strong indications about pausing rate hikes, as they continued to prioritise the battle against inflation.
Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce oil demand.
“Crude prices are going to struggle here as we have bearish sentiment in the world’s two largest economies,” said Edward Moya, an analyst at OANDA.