Crude oil prices were up 0.4% on Monday across both major benchmarks, Brent and WTI, after giving up all of their gains this year.
Monday’s oil gains come on concerns about supply disruptions with a potential hurricane hitting the Gulf of Mexico.
The rebound also comes despite renewed concerns about demand from China with weak consumer price growth and producer price deflation.
Add to that the deterioration in investor sentiment in the Eurozone and the growing concerns about the region’s potential to slide into recession.
The US National Weather Service said that the disturbance in the Gulf of Mexico this week could develop into a tropical storm and possibly even a hurricane. The agency said that this disturbance could develop rapidly.
China’s August reading for consumer and producer prices was below expectations, which in turn is not providing a boost to falling crude prices in light of the flood of negative data from various major economies.
Consumer prices in August inflated by 0.6% year-on-year, the fastest pace since February, but below expectations of 0.7%. Producer prices contracted for the 23rd consecutive month, by 1.8% year-on-year in the same period, which also exceeded expectations for a 1.5% contraction.
Meanwhile, China’s National Bureau of Statistics said that ex-food price growth moderated due to weaker demand for travel and hospitality as the summer vacation was coming to an end, and that the producer price contraction was due to insufficient demand and a downward trend in commodity prices around the world.
Today, we also saw more negative data from the Eurozone, and renewed concerns about a recession, especially with negative signs from the German economy, which in turn could put further downward pressure on oil prices. The global economic slowdown is contributing to weak demand from China, which is a major factor negatively affecting oil prices. This comes on top of already weak domestic demand, further compounding the challenges for the oil market.
The Sentix Investor Confidence for the eurozone recorded its weakest reading since last February at -15.4, which is also lower than expected. Sentix’s commentary on the survey results was full of very negative phrases such as “Germany chaos,” and that the German economy is “in free fall” and that the eurozone economy is “on the brink of recession.”
This comes as recession fears and investors’ hopelessness, especially regarding the German economy, which is putting a heavy pressure on the region’s economy, specifically due to “political and economic chaos,” according to Sentix. Meanwhile, the expectations index – a measure of pessimism about the future – rose slightly from -8.8 to -8.0 for the eurozone.
Today’s figures follow a series of unexpected negative reports from the US labor market over the past week, heightening concerns about the economy’s health. As a result, crude prices fell to their lowest levels this year. Initially, weak labor data was seen as positive for the energy market, as it raised hopes that the Federal Reserve might cut interest rates. However, today, the data has once again become a bearish factor for prices, with renewed fears of recession and a sharp drop in inflation.
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