Skip to content Skip to Search
Skip navigation

Oil slips more than $1 over China’s deflation fears

By Pramod Kumar
Storage tanks at Marathon Petroleum's Los Angeles Refinery, which processes domestic and imported crude oil in Carson, California Reuters/Bing Guan
Storage tanks at Marathon Petroleum's Los Angeles Refinery, which processes domestic and imported crude oil in Carson, California

Oil prices declined over 2 percent on Monday, wiping out all of last week’s gains as China’s stimulus plans failed to inspire investor confidence.

The country’s oil imports fell for the fifth month, stoking concern about fuel demand.

The markets also remained on edge about potential Israeli attacks on Iranian oil infrastructure.

Brent crude futures were down $1.84, or 2.3 percent, at $77.20 per barrel by 11:00 GMT, while US West Texas Intermediate crude futures fell $1.87, or 2.47 percent, to $73.69 per barrel. Brent gained 99 cents last week, while WTI climbed $1.18.

China’s deflationary pressures worsened in September, according to official data released on Saturday. A press conference the same day left investors guessing about the overall size of a stimulus package to revive the fortunes of the world’s second-largest economy.

“China’s monetary stimulus measures failed to stimulate and the weekend’s pledge from the finance ministry to borrow more was long on cliches and phrases but short on reassuring and convincing details,” said Tamas Varga of oil brokerage PVM.

“Deflationary pressure on producer prices remained entrenched in September amidst lax consumer demand.”

China’s consumer price index missed expectations last month, while the producer price index fell at the fastest pace in six months, down 2.8 percent year-on-year, according to the National Bureau of Statistics.

China’s oil imports also fell in September by 0.6 percent from a year earlier, data showed on Monday, as plants curbed purchases because of weak domestic fuel demand and narrowing export margins.

The negative news from China outweighed market concerns over the lingering possibility that an Israeli response to Iran’s October 1 missile attack could disrupt oil production.

The US said on Sunday it will send troops to Israel along with an advanced anti-missile system in a highly unusual deployment meant to bolster the country’s air defenses.

“General feeling is that markets are treading water ahead of the Israeli response to Iran, with no real direction for prices until the situation in the Middle East is clearer,” said Panmure Liberum analyst Ashley Kelty.

Meanwhile, Opec on Monday cut its forecast for global oil demand growth in 2024, reflecting data received so far this year, and also lowered its projection for next year, marking the producer group’s third consecutive downward revision.

The Organization of the Petroleum Exporting Countries in a monthly report said world oil demand will rise by 1.93 million barrels per day in 2024, down from growth of 2.03 million bpd it expected last month.