Oil dips on China demand concerns, fading Middle East worries

Oil prices fell on Tuesday, extending losses from the previous session amid concerns about demand in China, the world’s largest crude importer, while the market shrugged off the risk of conflict escalating in the Middle East.

Brent crude oil futures fell by 40 cents, or 0.5%, to US$79.38 a barrel by 0640 GMT. U.S. crude futures were down 43 cents, or 0.6%, at US$75.38 a barrel.

A raft of disappointing economic news out of China has shaken markets recently. China’s manufacturing activity likely shrank for a third month in July, a Reuters poll showed on Monday.

Also on Monday, Citi cut China’s growth forecast to 4.8% from 5% after the country’s second-quarter growth missed analyst estimates, noting that economic activity softened further in July.

“We believe the market has a stronger downside bias in the short term, weighed by continuing slack domestic demand from China, as well as potential output restoration by some OPEC+ members in Q4,” said Emril Jamil, a senior analyst at LSEG Oil Resarch, referring to the Organization of the Petroleum Exporting Countries and allies led by Russia.

“Tariff tensions with Europe and the U.S. will also influence Chinese crude demand going forward,” Jamil said.
The market is watching an upcoming meeting of China’s top decision-making body, the Politburo, expected to take place this week, that could elicit further economic policy support.

But expectations are limited after the Third Plenum, a key policy meeting in mid-July, largely reiterated existing economic policy goals and failed to lift market sentiment.

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