Oil prices contract in today’s trading as the Chinese economic outlook continues to falter despite improvement in other sectors. Traders remain worried about China’s economy and its performance in the long run as the trade war continues.
The prolonged dispute between the US and China have dented the demand growth of one of the largest oil markets.
Oil prices have been on a wild ride since September started as it fluctuates due to the Saudi Aramco attack. Oil traders are now turning their focus on China and the stats of the country.
Benchmark Brent oil futures have dropped by 1.26% or 0.77 points in sessions. Brent oil prices have moved between $60.11 and $61.55 in today’s trading.
Meanwhile, West Texas Intermediate or WTI crude oil prices have also contracted by 1.23% or 0.69 points. WTI crude barrels are seen trading between $55.12 and $56.35 in Monday’s sessions.
News from the Chinese Purchasing Managers’ Index (PMI) did very little to support oil prices in the market. China’s PMI turned out a bit better than what analysts forecasted, rising 49.8% in September, 0.3% better than August’s results.
Despite progress, the PMI did not meet the 50-point mark that separates monthly expansion from expansion.
Experts are expecting that the Chinese government will ramp up its fiscal and monetary effects to boost demand and growth. China is currently the second-biggest consumer of oil and petroleum products in the world.
Saudi Factor
Part of the reason for the contraction of oil prices is the restoration of Saudi Aramco’s production. Oil prices have been greatly affected by the September 14 attack on Saudi Aramco’s oil refining facilities.
Just recently, Riyadh’s Crown Prince Mohammed bin Salman warned extreme oil prices if tensions in the Persian Gulf regions escalate. In an interview, the crown prince expressed his sentiments about the stance of countries against Iran.
Prince Mohammed said that if the world doesn’t take a stand against Tehran, tensions could continue to escalate, affecting world interests. The crown prince warned that oil prices will move “to unimaginably high numbers”, exceeding records.
The controversial attack has cut down roughly 50% of Saudi Aramco’s output, or more than 5% of the global crude production. Oil prices recorded their biggest jump the following Monday as traders worry about supply.
“Oil War”?
In an interview, Saudi Arabia’s Foreign Affairs Minister Adel al-Jubeir commented about the attack on Saudi Aramco. Adel said that the attack is not just against Riyadh but to the entire global economy.
After denying its involvement, Tehran has now called for an independent investigation for the event. Iranian Foreign Minister said Tehran wants to avoid conflict but is prepared for “all-out war” if necessary.
The recent warning from the Crown Prince of Saudi Arabia and Tehran’s comments distresses the market about the outlook of oil prices.
In the event of an “oil war”, oil prices could really escalate to levels unprecedented. However, experts still believe that Riyadh is unlikely to escalate the situation unless the US backs it up.
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