WTI crude prices slid on Tuesday morning to just above $70 per barrel—an important psychological threshold for the U.S. crude oil benchmark.
WTI was trading at $70.16 per barrel at 11:34 a.m. ET, a $1.62 (2.26%) drop on the day, as renewed fears of immediate lackluster global demand pervaded the oil markets.
The Brent crude oil benchmark also was trading down on Tuesday—by 1.47%, to below $75 per barrel at $74.99.
The catalysts behind the moves are generally demand-based. In a show of no confidence in its economy, China slashed its main benchmark lending rates for the first time in nearly a year on Tuesday—by 10 basis points for its one-year loan prime rate. As crude oil’s number one importer, a weak Chinese economy spells trouble for global crude demand. Lending credence to China’s economic woes was Goldman Sachs’ Sunday forecast on China’s economy, which included phrases like “fizzled out” to refer to China’s post-Covid recovery.
The demand concern doesn’t stop with China. The European Union has seen two consecutive quarters of economic contraction thanks to inflation and slowed consumer spending. Economic output in the EU fell during Q1, adding to the fears that a global slowdown could dent oil demand.
The largest bearish factor, however, is OPEC+’s production quota cuts. While this would seem in theory to restrict crude oil supply, the move is a testament to the group’s likely outlook on crude oil demand—mainly crude oil demand from China.
Meanwhile, U.S. crude oil production has rallied over the last two weeks to 12.4 million bpd, a rise of 200,000 bpd from the beginning of the year.
WTI is still trading above the lows seen on June 14 and June 15, when the U.S. benchmark prices sagged to near $68 per barrel.
By Julianne Geiger for Oilprice.com
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