West Texas Intermediate (WTI) recovered its intraday losses, trading around $80.00 per barrel in European markets on Wednesday. The decline in the US Dollar contributed support for the crude demand, underpinning the oil prices.
Additionally, the oil price has support due to the declining U.S. stockpiles, the world’s largest oil producer and consumer. The American Petroleum Institute (API) reported a decline of 4.4 million barrels in weekly crude oil stock for the week ending July 12. Analysts surveyed by Reuters had estimated a smaller decrease of 33,000 barrels. The US Energy Information Administration (EIA) will release its official storage report later in the day.
Challenges from China
However, prices of the black gold faced challenges due to a slowing Chinese economy, which is reducing demand in the world’s largest oil-importing country. China’s Gross Domestic Product (GDP) grew 4.7% year-over-year in the second quarter, compared to a 5.3% expansion in the first quarter and an expected 5.1%. This is the slowest growth since the first quarter of 2023.
Standard Chartered expects cuts from the People’s Bank of China (PBoC) in rates and the reserve requirement ratio (RRR) as GDP growth decelerates in Q2. China’s growth drivers remain uneven, and trade tensions are rising, with the US and EU imposing new tariffs on Chinese electric vehicles (EVs).
Federal Reserve’s Hawkish Sentiment
Additionally, crude oil prices struggled due to the emergence of the hawkish sentiment surrounding the Federal Reserve policy stance after the speech from Fed Board member Dr. Adriana Kugler on Tuesday who indicated that if upcoming data does not confirm that inflation is moving toward the 2% target, it may be appropriate to maintain current rates for a while longer.
