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HOUSTON (Reuters) – Oil prices fell more than 1% for a third straight day on Tuesday, weighed down by concerns that a slowing Chinese economy could hurt demand, although declines were capped by a growing consensus that the U.S. Federal Reserve could start cutting its key interest rate as soon as September.
Brent futures settled down $1.12, or 1.3%, at $83.73 a barrel, while US West Texas Intermediate (WTI) crude fell $1.15, or 1.4%, to $80.76.
“Weak economic data is coming out of China, as ongoing government support programs have been disappointing, and many Chinese refineries are cutting power due to weak fuel demand,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Official data showed the world’s second-largest economy grew 4.7% in April-June, the lowest rate since the first quarter of 2023 and also below the 5.1% forecast in a Reuters poll. That’s slower than the 5.3% expansion of the previous quarter, which has been hampered by a long-running property slump and job insecurity.
Meanwhile, the International Monetary Fund said on Tuesday the global economy is set to grow modestly over the next two years due to soft activity in the United States, a slowdown in Europe and a rise in consumption and exports in China, but risks to this path remain high.
In the U.S., Fed Chairman Jerome Powell said on Monday that three readings of inflation in the second quarter of this year “increase some confidence” that the pace of price growth is durably returning to the central bank’s target, comments interpreted by market participants as a sign that a move to cut interest rates may not be far off.
Lower interest rates reduce the cost of borrowing, which can boost economic activity and demand for oil.
US retail sales were also unchanged in June, a sign of consumer resilience that has boosted economic growth prospects for the second quarter and helped ease fears of a sharp slowdown in the economy.
Federal Reserve Governor Adriana Kugler said it would be appropriate to ease monetary policy later this year if economic conditions remain favorable.
But some analysts have cautioned against being too bullish, as expected weakness in some macroeconomic data from the US could indirectly impact oil demand in the near term.
US crude oil inventories fell by an average of 33,000 barrels last week, according to a Reuters survey on Tuesday; stockpile data from industry group the American Petroleum Institute is expected later, while government figures are expected on Wednesday.
(Reporting by Arathi Somasekhar in Houston, Paul Carsten in London and Arunima Kumar in Bengaluru, and Trixie Yap in Singapore; Editing by Andrea Ricci and Nick Zieminski)
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