Commodities News

Oil prices drop on weak China data and low economic growth target

Oil prices drop on weak China data and low economic growth target

Oil prices fell on Tuesday as weak data from China raised concerns about the recovery of the world’s second largest economy. Trade data released earlier in the day showed China’s imports falling below expectations, with crude oil imports down 1.3% from a year earlier over the first two months of 2023. This suggests that domestic demand remained weak, causing analysts to speculate that this could impact sentiment in the short-to-medium term if imports do not recover. This news was compounded by the announcement of the lowest economic growth target for 2023 in over 30 years, which disappointed traders after last week’s impressive business activity numbers.

China’s Weak Import Data:

China’s weaker-than-expected crude oil imports raise concerns about the country’s domestic demand. The trade data showed that imports slumped over 10% year-on-year in February, adding to worries about China’s economic recovery. This could impact sentiment in the short-to-medium term if imports do not recover. Analysts at ING have warned that “China’s latest oil trade data hints at softer domestic demand which could weigh on sentiment in the short-to-medium term if imports do not recover”.

Lowest Economic Growth Target in Over 30 Years:

Adding to the concerns about China’s economy is the announcement of the lowest economic growth target for 2023 in over 30 years. Chinese government officials announced this over the weekend, which disappointed traders after expectations had been ramped up by last week’s impressive business activity numbers. This news could impact oil prices as traders remain cautious ahead of Federal Reserve Chair Jeremy Powell’s two-day testimony to Congress.

Federal Reserve Chair Powell’s Testimony:

Traders are remaining cautious ahead of Federal Reserve Chair Jeremy Powell’s two-day testimony to Congress, starting later in the session. Powell’s colleagues have tended to emphasize the need for the U.S. central bank to continue to lift interest rates to combat inflation. If Powell continues with this hawkish talk, then the dollar is likely to appreciate. However, he mentioned “disinflation” at his last press conference and he may seek to temper the overall hawkish tone to provide the Fed with more flexibility to pursue the policies it deems necessary. This would weaken the greenback, which typically increases demand for dollar-denominated oil from buyers paying with other currencies.

U.S. Inventory Data:

Another factor that could impact oil prices is the U.S. inventory data from the American Petroleum Institute, which is due to be released later on Tuesday. Last week saw an increase in crude stocks of over 6 million barrels, but analysts now expect a pause in the recent string of increases in domestic stockpiles. The inventory data could impact oil prices, and traders will be watching closely to see if there is a pause in the recent string of increases in domestic stockpiles.

Conclusion:

Oil prices fell on Tuesday due to weak data from China and the announcement of the lowest economic growth target for 2023 in over 30 years. Traders are remaining cautious ahead of Federal Reserve Chair Jeremy Powell’s two-day testimony to Congress, which could impact the dollar and oil prices. The U.S. inventory data from the American Petroleum Institute is also due to be released later on Tuesday, which could impact oil prices. It remains to be seen how these factors will impact oil prices in the short-to-medium term.

Author
Alice Scott is a prolific author with a keen interest in the stock market. As a writer for Livemarkets.com, she specializes in covering breaking news, market trends, and analysis on various stocks. With years of experience and expertise in the financial industry, Alice has developed a unique perspective that allows her to provide insightful and informative content to her readers.