Oil markets have continued their rollercoaster ride, with oil prices declining during Wednesday’s morning session as traders continue weighing on China’s latest stimulus package. Brent crude for November delivery declined 1.3% to trade at $74.22 per barrel at 10.25 am ET while WTI crude for October delivery fell by a similar margin to change hands at $70.60 per barrel. China has unleashed a swath of stimulus measures including cuts to its benchmark interest rate as Beijing battles a slowdown in the world’s second-largest economy.
China’s central bank unveiled a broad stimulus package on Wednesday–the boldest since the pandemic–including cuts to its benchmark interest rate aimed at jumpstarting the faltering economy. However, analysts have warned that more fiscal help is needed to boost economic activity in the world’s second-largest economy. Economists also remain skeptical whether China will hit the government’s full-year growth target of 5%.
“Concerns lingered that more fiscal support would be needed to boost confidence in the Chinese economy. This uncertainty raised doubts about sustained demand growth, weighing on crude prices,” George Khoury, global head of education and research at CFI Financial Group, told Reuters.
However, some experts remain bullish on the oil price trajectory thanks to falling U.S. inventories and geopolitical concerns.
“Market participants (are) questioning if the latest stimulus measures by the People’s Bank of China are enough to support Chinese economic and oil demand growth,” said UBS analyst Giovanni Staunovo. “I still see further upside for crude prices, with oil inventories still falling globally,” he added.
The latest weekly data by the U.S. Energy Information Administration (EIA) revealed that U.S. oil stockpiles fell by 4.34 million barrels last week; gasoline inventories declined by 3.44 million barrels while distillate stocks were down by 1.12 million barrels.
The intensifying Middle East conflict between Israel and Iran-backed Hezbollah in Lebanon is also offering support for crude prices, with cross-border rockets launched by both sides increasing fears of a wider conflict. According to Achilleas Georgolopoulos, investment analyst at brokerage XM, a measured attack by Iran remains on the cards in order to save face, but also without enraging its Western allies, risking more rigorous enforcement of oil export sanctions and disrupting the main oil trade routes.
By Alex Kimani for Oilprice.com
