Oil prices fall as investors weigh stimulus from China

Oil markets continued their rollercoaster ride, with oil prices falling during the morning session on Wednesday as traders continued to weigh China’s latest stimulus package. Brent crude for November delivery fell 1.3% to trade at $74.22 a barrel at 10:25 a.m. ET, while WTI crude oil for October delivery fell by a similar margin to change hands at $70.60 a barrel. China has unleashed a raft of stimulus measures, including cuts in its benchmark interest rate, as Beijing grapples with a slowdown in the world’s second-largest economy.

China’s central bank on Wednesday unveiled a sweeping stimulus package — its boldest since the pandemic — including cuts in its benchmark interest rate, aimed at reviving the faltering economy. However, analysts warned that more fiscal aid is needed to stimulate economic activity in the world’s second largest economy. Economists also remain skeptical that China will meet the government’s 5 percent growth target.

“Concerns persisted that more fiscal support would be needed to boost confidence in the Chinese economy. This uncertainty has raised doubts about sustained demand growth, which is weighing on crude oil prices.” George Khoury, global head of education and research at CFI Financial Group, told Reuters.

However, some experts remain bullish on the path of oil prices due to falling US inventories and geopolitical concerns.

“Market participants are (wondering) whether the People’s Bank of China’s latest stimulus measures are enough to support China’s economic growth and oil demand,” said UBS analyst Giovanni Staunovo. “I still see an upside for crude oil prices, with oil inventories continuing to decline globally“, he added.

The most recent weekly data by the US Energy Information Administration (EIA) revealed that US oil inventories fell by 4.34 million barrels last week; Gasoline stocks fell by 3.44 million barrels, while distillate stocks fell by 1.12 million barrels.

The Middle East is getting more intense conflict between Israel and Iran-backed Hezbollah in Lebanon is also providing support for crude oil prices, with cross-border rocket fire from both sides raising fears of a wider conflict. According to Achilleas Georgolopoulos, investment analyst at brokerage XM, a measured attack by Iran remains on the cards to save face but also without angering its Western allies, risking tougher enforcement of oil export sanctions and disrupting key trade routes. with oil.

By Alex Kimani for Oilprice.com

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