Oil prices dropped sharply on Monday, erasing nearly all gains from the previous week, after disappointing economic data from China raised fears about fuel demand in the world’s largest crude importer. Brent crude futures fell by USD 1 to USD 78.04 per barrel, while US West Texas Intermediate (WTI) crude also declined by USD 1, or 1.3%, to USD 74.56 per barrel.
Both benchmarks had given up over 1.5% earlier in the day before recovering slightly. Last week, Brent had gained 99 cents, and WTI had climbed USD 1.18, but those gains have now been overshadowed by new concerns about China’s economic outlook.
Data released on Saturday revealed that China’s inflation rate continued to decline in September, signaling increasing deflationary pressures. This, combined with uncertainty surrounding the government’s economic stimulus plans, has left investors apprehensive about the potential for weak fuel demand. A press conference that same day failed to clarify the size of the expected stimulus package, further fueling market jitters.
“The consumer price index indicates a sustained deflationary trend and weaker domestic consumption, despite the announcement of aggressive monetary stimulus measures in September,” said Priyanka Sachdeva, an analyst at Phillip Nova.
China’s National Bureau of Statistics reported that the consumer price index fell short of expectations, while the producer price index dropped 2.8% year-on-year—the steepest decline in six months.
Market analyst Tony Sycamore criticised the recent briefing by the Chinese finance ministry, describing it as “a flop.” He noted the lack of fiscal measures needed to alleviate growth risks and stimulate consumer spending, which could ignite demand in the struggling economy.
Despite ongoing geopolitical concerns, such as potential disruptions to oil production due to an Israeli response to Iran’s recent missile attack, the focus has shifted back to China’s economic challenges. The combination of softening demand signals and unclear policy responses is creating a bearish outlook for oil markets in the short term.