Oil prices witnessed a decline of nearly 1.5%, primarily driven by data originating from China.
This decline can be attributed to the fact that China plays a significant role in the expected growth of oil demand this year. Initially, oil imports were disappointing due to high inventory levels.
However, as inventories have now been depleted, it is anticipated that China will increase its oil imports. Nevertheless, if the Chinese economy does not receive stronger stimulus, the growth in oil demand within China may fall short of expectations.
Farah Mourad, Senior Market Analyst of XTB MENA said, “Additionally, the current devaluation of the dollar could potentially support the ongoing economic recovery, although the possibility of a “tactical correction” should not be disregarded.
As for the issues plaguing the Chinese economy, they can be identified in two key areas: the real estate market and the strength of the yuan.
“The yuan’s strength is not sufficient to bolster Chinese exports, which previously enjoyed a competitive edge in terms of affordability compared to their counterparts.
“Furthermore, sentiment in the real estate market remains persistently weak. It is worth noting that despite the underwhelming data, the GDP figures do not appear weak enough to prompt further interest rate cuts.
“The People’s Bank of China is scheduled to decide on interest rates on July 20, but there are no expectations of rate cuts being implemented despite the weak data, as previously anticipated.”