Oil prices continued their decline on Tuesday, extending losses from the previous session due to concerns about demand in China, the world’s largest crude importer. The market also seemed to disregard the potential for conflict escalation in the Middle East.
By 0640 GMT, Brent crude oil futures had dropped 40 cents, or 0.5%, to $79.38 a barrel. Similarly, U.S. crude futures fell by 43 cents, or 0.6%, to $75.38 a barrel.
Recent disappointing economic news from China has unsettled markets. According to a Reuters poll, China’s manufacturing activity likely contracted for the third consecutive month in July. Additionally, Citi revised China’s growth forecast down to 4.8% from 5% following lower-than-expected second-quarter growth and further economic softening in July.
Emril Jamil, a senior analyst at LSEG Oil Research, stated, “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.” He also noted that “tariff tensions with Europe and the U.S. will influence Chinese crude demand going forward.”
The market is closely monitoring an upcoming meeting of China’s top decision-making body, the Politburo, expected to take place this week. This meeting could result in further economic policy support, although expectations are limited after the Third Plenum in mid-July reiterated existing economic policies without boosting market sentiment.
Oil prices fell by 2% in the previous session after Israel indicated that its response to a Hezbollah rocket strike in Israeli-occupied Golan Heights on Saturday would be measured to avoid escalating into a broader conflict in the Middle East. This stance was supported by a U.S. diplomatic effort reported by Reuters, aiming to prevent Israel from striking significant civilian infrastructure or the capital of Lebanon, Beirut, in retaliation.
In Venezuela, the opposition claimed it had won 73% of the vote, despite the national electoral authority declaring incumbent Nicolas Maduro the winner of the election, granting him a third term in office.
ANZ analysts noted, “Nicolas Maduro’s victory in the latest Venezuelan election is a headwind for global supply, as this could result in tighter US sanctions,” potentially reducing Venezuela’s exports by 100,000-120,000 barrels per day.
Governments in Washington and other capitals expressed skepticism about the election results, calling for a comprehensive vote count. Protests erupted across towns and cities in Venezuela on Monday.
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