In early Wednesday trading, oil prices experienced a slight decline, extending the losses observed from a 1% decrease in the previous session. This decrease was primarily driven by the lingering impact of weak economic data from China, which is the largest global oil importer, overshadowing the reduction in U.S. oil stockpiles.
Brent crude futures dropped by 21 cents, reaching $84.68 per barrel, while U.S. West Texas Intermediate crude slipped by 20 cents to $80.79 per barrel. These benchmark prices had reached their lowest point since August 8th on Tuesday.
Statement to clients that concerns regarding China's slowing economy negatively influencing demand were counteracting the tight supply conditions in the oil market. Additionally, crude inventories at the Cushing hub were expected to decline to their lowest level since April, and Asian refineries were actively acquiring all available U.S. oil cargoes.
According to sources in the market citing figures from the American Petroleum Institute, U.S. crude stocks decreased by approximately 6.2 million barrels last week. This draw was considerably larger than the 2.3 million-barrel decrease anticipated by analysts surveyed by Reuters.
Later on Wednesday, U.S. government data on inventories is scheduled to be released. The primary factor exerting bearish pressure on the market remains China's economic activity data for July, which was published on Tuesday. The figures for retail sales, industrial output, and investment did not meet expectations, raising concerns about a more profound and prolonged growth slowdown.
As a response to the July activity data, some economists have highlighted the risk that China, being the world's largest oil importer, might struggle to achieve its growth target of approximately 5% for the year without additional fiscal stimulus. Beijing has already reduced key policy rates to stimulate economic activity, and some analysts are optimistic that further stimulus measures will be introduced soon to invigorate the economy and bolster demand for commodities like oil.
