Oil retreats following disappointing data from China

The commodity market sees a surge in selling pressure as imports decline in China

By Nadia Elbilassy | @Nadia Elbilassy | 8 August 2023

Midday Market update
  • Oil prices retreat by nearly 1% due to China's larger-than-expected import decline

  • Brent crude futures slide 0.34% to $85.05 per barrel, and West Texas Intermediate crude drops 0.31% to $81.69 per barrel

  • Gold prices drop, with spot prices down 0.2% to $1,933 per ounce, and futures contracts dipping 0.1% to $1,967 per ounce

Oil retreats and approaches $80 per barrel

Oil prices dropped almost 1%, triggered by data revealing a larger-than-expected drop in China's imports for July. The data served as an additional signal of the challenges confronting the world's second-largest economy and primary oil importer.

Despite earlier efforts by Saudi Arabia to prevent global price declines, Brent crude futures slid to $85.05 per barrel, marking a 0.34% decrease. Similarly, West Texas Intermediate crude recorded a 0.31% decrease, settling at $81.69 per barrel.

China's oil imports declined significantly reaching 10.29 million barrels per day, representing an 18.8% drop compared to June figures. However, it's important to note that this still marked a 17% increase on a yearly basis. Concurrently, China's total imports experienced a 12.4% decrease, and exports fell by 14.5% on an annual basis, marking the sharpest decline rate since February 2020.

These discouraging figures emerged after the Kingdom of Saudi Arabia's confirmation of plans to extend its voluntary production cut of one million barrels per day for an additional month, encompassing September. In addition to Russia also announcing a 300,000 barrels per day reduction in its oil exports.

Gold prices under pressure

Gold prices shed earlier today as market participants exercised caution ahead of the anticipated release of inflation data next Thursday. Spot prices dropped by 0.2%, reaching $1,933 per ounce, while futures contracts also dipped by 0.1%, settling at $1,967 per ounce.

Focus is now centered on forthcoming inflation data from the US, which holds significant implications for the future decisions of the Federal Reserve.

Expectations predominantly align with a projected 3.3% year-on-year increase in the Consumer Price Index (CPI), surpassing the previous 3% rise. Should the upcoming data align with these projections, it is likely to exert downward pressure on gold prices.