Oil prices fell by about five percent, Monday, against the backdrop of expectations that Iranian oil may return to the market, and data that showed that the Chinese economy is facing difficulties in light of Covid restrictions and the deterioration of the real estate sector.
The price of Brent North Sea crude fell 5.1 percent to $93.15 a barrel, while the price of West Texas Intermediate crude fell 5.3 percent to $87.23 a barrel.
Meanwhile, stock markets fell while the dollar was trading mixed as investors welcomed the decline in inflation in the United States, although it is still at its highest level in decades.
“It was a disappointing start to a week in financial markets as investor optimism collided with the reality of China’s economic data,” said Craig Erlam, senior market analyst at OANDA.
China’s central bank cut key interest rates in a surprise move on Monday, while a set of data showed a decline in the world’s second-largest economy.
The data revealed that China’s industrial production and retail sales growth in July were less than expected.
Industrial production increased by 3.8 percent on an annual basis, but declined compared to the 3.9 percent recorded in June, much less than analysts’ expectations.
Beijing’s adherence to the “zero Covid infection” strategy is slowing the economic recovery as sudden closures and prolonged quarantine measures deal a blow to business activity and the recovery of consumption.
Meanwhile, Iranian Foreign Minister Hossein Amir Abdollahian said that his country will present by midnight Monday its “final proposals” on reviving the 2015 nuclear agreement after Washington agreed to two proposals for Tehran.
Reaching an agreement means that Iran’s 2.5 million barrels per day of crude output will no longer be subject to international sanctions, something that will help ease the pressure on supplies that has driven up prices.
Oil prices, which were mainly low on the back of Chinese economic data, fell further and recorded a daily decline of more than five percent.
The major stock markets in Europe closed with modest gains, while Wall Street shares fell in morning trading.
Market analyst Fouad Razakzadeh at City Index and FOREX.com explained that talk of an American recession has returned to the fore after a key industry-related index declined and turned negative.
Also, the markets are awaiting the release of the minutes of the last Federal Reserve meeting on fiscal policy in July, on Wednesday, with the aim of obtaining clues about the interest rate plans of the US Central Bank.
Investors are concerned that after the US central bank raised interest rates by three-quarters of a point, any further increase could stifle the economic recovery.