© Reuters. FILE PHOTO: A VLCC oil tanker is seen at a crude oil terminal in Ningbo Zhoushan port, Zhejiang province, China May 16, 2017. Picture taken May 16, 2017. REUTERS/Stringer /File Photo
By Natalie Grover
LONDON (Reuters) -Oil prices edged lower on Tuesday on sluggish Chinese economic figures coupled with fears that Beijing’s unexpected cut in key policy rates was not sufficiently substantial to rejuvenate the country’s sputtering post-pandemic recovery.
futures dipped 54 cents to $85.67 a barrel by 1317 GMT while U.S. West Texas Intermediate crude fell 74 cents to $81.77. Both benchmarks lost more than $1 earlier in the session.
Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, have helped to galvanise a rally in prices over the past seven weeks.
However, China’s industrial output and retail sales data on Tuesday showed the economy slowed further last month, intensifying pressure on already faltering growth and prompting authorities to cut key policy rates to bolster economic activity.
When the oil market appears to be comfortable, it is often the case that China is the number one fire douser, throwing a wet blanket over those dreaming of prices north of $90, said John Evans of oil broker PVM.
China’s central bank made a marginal cut to interest rates after data that highlighted intensifying pressure on the economy, mainly from the property sector, though analysts say the cut was too small to make a meaningful difference.
There are concerns China could struggle to meet its growth target of about 5% for the year without more fiscal stimulus.
On Tuesday Barclays (LON:) cut its forecast for China’s 2023 growth in gross domestic product to 4.5%, citing a faster than expected deterioration in the housing market.
On a brighter note, the world’s biggest oil importer’s refinery throughput in July rose 17.4% from a year earlier as refiners kept output elevated to meet demand for domestic summer travel and to cash in on high regional profit margins by exporting fuel.
Yet sentiment on China is souring, said PVM’s Evans, adding that markets are becoming bored of the “tepid stimulus” from officials who keep talking big but fail to deliver.