Crude oil prices experienced a downturn at the beginning of the week following disappointing economic data from China, which many analysts interpreted as a negative sign for oil demand.
The latest figures revealed a modest increase in consumer prices for September, rising by only 0.4%. This growth fell short of economists’ expectations, which had predicted a rise of 0.6%, as reported by Reuters. Moreover, this was the slowest increase in consumer prices in three months, suggesting a trend of weakening economic conditions.
Typically, lower consumer prices would be seen as positive for oil demand, as they often lead to increased consumption. However, the prevailing sentiment in the market indicates that declining prices reflect a decrease in demand, which could further deteriorate as inflation continues to slow.
“China is grappling with persistent deflationary pressures stemming from weak domestic demand. The recent shift in fiscal policy, as highlighted in Saturday’s press conference, aims to address these challenges,” stated the chief economist at Hong Kong-based Pinpoint Asset Management.
On Saturday, the Chinese government announced plans for additional economic stimulus, which would generally bolster oil prices. However, details surrounding the scale of this stimulus package remained vague, consisting primarily of “significantly increased” debt purchases by local governments and subsidies for low-income households. Traders expressed disappointment over the lack of specific figures regarding the extent of the Chinese government’s spending on these measures.
Consequently, oil traders momentarily shifted their focus from the Middle East to China, the world’s largest oil importer. They speculated that any stimulus measures would likely fall short of supporting global stock and commodity markets.
This shift in attention occurred despite reports from Friday indicating that the U.S. plans to intensify its sanctions against Iran, specifically targeting its so-called ghost fleet of oil tankers.
“These measures will further hinder Iran’s financial capabilities, which are used to support its missile programs and fund terrorist organizations that threaten the United States and its allies,” said National Security Adviser Jake Sullivan.
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