By Peter Nurse
Investing.com -- Oil prices fell Tuesday as weak Chinese data raised concerns about a slowdown in economic activity in the world’s largest crude importer, weighing on likely future demand.
By 08:45 ET (13:45 GMT), U.S. crude futures traded 1% lower at $85.03 a barrel, while the Brent contract fell 0.9% to $92.33.
Data released earlier Tuesday showed that China’s industrial output growth slowed to 5.0% while retail sales turned negative in year-on-year terms, hurt by the ongoing real estate crisis and recurring localized COVID-19 lockdowns.
There had been hope late last week that Chinese health authorities were looking to relax the country’s strict Zero-COVID policy, but the number of cases have been on the rise in Beijing and other big cities, likely dashing relaxation hopes.
JPMorgan cut its quarterly and full-year forecasts for economic growth in China, earlier Tuesday, citing the ongoing COVID restrictions.
Mounting global economic challenges prompted the Organization of Petroleum Exporting Countries to cut its forecast for 2022 global oil demand growth for a fifth time since April.
“Given the sizeable supply cuts from November through until the end of next year, OPEC supply will still be lower than demand for OPEC oil over 2023,” analysts at ING said, in a note.
The International Energy Agency also trimmed its forecast for average demand growth next year by 40,000 barrels a day to 1.6 million barrels a day next year from 2.1 million barrels a day in 2022, a revision entirely due to the outlook in China.
The IEA added that the market was likely to stay tight as Russia may struggle to find new markets for its oil once a European import ban kicks in, potentially pushing the nation’s average output below 10 million barrels a day next year.
The European Union is set to ban imports of most Russian crude on Dec. 5.
Later in the session, the American Petroleum Institute releases its weekly estimate of U.S. crude oil stocks, and is expected to show a fall of around 300,000 barrels last week, a substantial improvement from the previous week’s gain of over 5 million barrels.
“The latest drilling productivity report from the EIA shows that the number of drilled but uncompleted wells (DUCs) increased by eight in October, which is the first monthly increase in DUCs since June 2020,” ING added.