The weak economic data from China show that the growth engine in the Middle Kingdom is losing momentum. They are stoking concerns about demand on the oil market and sending the oil price plummeting. The euro is also losing.
Disappointing economic data from China on Monday fueled renewed demand concerns and pushed oil prices further lower. Both the crude oil variety Brent from the North Sea and the US leading variety WTI became cheaper by four percent to 93.88 and 88.42 dollars respectively. Retail sales and industrial production in the People’s Republic fell short of expectations in July. Meanwhile, refinery production fell to its lowest level since March 2020, official data showed. Oil demand is weakening as record-high oil prices scared off both consumers and domestic logistics companies, said Heron Lin, an economist at Moody’s Analytics. Demand could remain under pressure for the rest of the year as well, as the looming corona restrictions encouraged precautionary savings and reduced oil consumption. At the same time, there were signs of an easing on the supply side in the crude oil market. The head of the world’s largest oil exporter, Saudi Aramco, said that the Saudi Arabian oil company could increase crude oil production to its maximum capacity of 12 million barrels a day if the government in Riyadh demands it.
Other commodities also came under pressure. Iron ore prices in the People’s Republic fell by 2.9 percent. Investors feared a slump in demand, also because the Chinese government shows no signs of deviating from the strict zero-Covid policy, which repeatedly leads to regional lockdowns. The price of copper fell 2.7 percent to $7,865 per ton. On the foreign exchange market, investors rely on the dollar, which is considered a “safe haven”. The dollar index rose 0.7 percent to 106.48 points against a basket of major currencies. In return, the euro fell by one percent to $ 1.0161.