Anika Begay
Vscek — Oil prices fell on Tuesday, reversing last week’s rally, as a series of economic signals this week prompted caution, while OPEC also cut its forecast for demand growth in 2024.
As of 09:20 ET (1320 GMT), it was down 0.9% at $79.36 a barrel, while the October yield was down 0.9% at $81.54 a barrel.
Prices have recovered sharply from seven-month lows as fears of a worsening conflict between Iran and Israel prompted traders to place a higher risk premium on crude.
But overall gains were still held back by lingering concerns about demand, especially given the weak economic situation in top importer China, and traders’ fears of a recession in the United States.
PPI Cools More Than Expected
Oil markets were again looking ahead to a series of key economic data this week for further guidance on growth and interest rates.
Data released Tuesday morning showed that U.S. producer price growth slowed more than expected on a year-on-year basis in July, in the latest sign of easing inflationary pressures in the world’s largest economy.
Final demand rose 2.2% annually last month, down from a revised 2.7% in June, according to data from the Labor Department. Economists had expected a decline to 2.3%.
Excluding more volatile items such as fuel and food, the so-called “core share” slowed to a monthly rate of 0.0%, from a revised 0.3% in June, and to 2.4%, from 3.0%.
The report comes out a day before the more closely followed one, which is expected to show inflation remained at 3.0% year-on-year in July, unchanged from June.
Traders are pricing in a 25- to 50-basis-point rate cut from the Federal Reserve in September, and cooling inflation could lead to a sharp rate cut.
In addition to inflation data, U.S. data will also be released later in the week.
(Ambar Warrick contributed to this article.)
and later this week, data from China is also expected, which is set to provide further clues about the world’s largest crude importer.
OPEC cuts oil demand forecast
The Organization of the Petroleum Exporting Countries (OPEC) said it expects oil demand to grow by 2.11 million barrels a day in 2024, down from its previous forecast of growth of 2.25 million barrels a day.
In a statement released Monday, the cartel highlighted growing doubts about China as the country continues to struggle with its post-COVID economic recovery.
The forecast for lower demand raised questions about how much leeway there was in OPEC’s plans to begin gradually reducing production cuts.
The cut added to concerns about a slowdown in global oil demand this year, especially on fears of weak demand in China, the world’s largest oil importer.
Monday’s expected demand cut comes just months before the cartel is due to meet to decide on its production path in the coming months.
