Oil Prices Fall as China Fails to Impress Markets.
Originally uploaded on March 08, 2024
Crude oil prices have fallen slightly this week as China's latest economic revival plans seemed to underwhelm investors as the demand outlook remains weak.
Worries about Chinese energy demand have been a problem for oil traders as the world’s number two economy struggles to regain anything like its pre-pandemic vigour. Beijing has announced its intentions to ‘transform’ its development mode, and address endemic overcapacity, but its 2024 growth target of 5% perhaps only served to remind investors that China remains in the slow lane, by its recent standards.
The Organization of Petroleum Exporting Countries and its allies (the ‘OPEC+’ group) have extended production cuts into this year’s second quarter. Still, that move was widely expected and didn’t affect prices much. More broadly the market remains caught between the prospect of plentiful supply from non-OPEC producers, and uncertain demand as the industrialised economies struggle with meagre growth or, in some cases, outright recession.
Prices are finding some support as Federal Reserve Chair Jerome Powell said yesterday that the US central bank was "not far" from gaining enough confidence that inflation is falling sufficiently to begin cutting interest rates. Typically lower interest rates raise consumer confidence and households buying power, increasing demand for goods and services in turn increasing oil demand.
Jeremy Hunt on Wednesday announced an extension of the 5p cut in fuel duty brought in during 2022, the extension will provide some relief to motorists who saw the cost of petrol soar to £1.91 per litre in June 2022. That has now fallen to £1.45 per litre, which remains well above a low of £1.01 in 2016, according to the RAC.
Fuel card users can expect another fall in fuel prices for next week in the region of .30 pence per litre.