Oil prices dipped slightly in early Asian trading on Tuesday, following weak economic data from China that dampened market sentiment. Traders also remained cautious ahead of the U.S. Federal Reserve’s policy meeting later this week.
As of 20:41 ET (01:42 GMT), Brent crude futures edged down 0.2% to $73.81 a barrel, while WTI crude futures slipped 0.1% to $70.20 a barrel.
Both contracts, set to expire in February, declined on Monday after disappointing Chinese data fueled concerns about slowing demand.
Weak Chinese Data Dampens Demand Outlook
China released key economic indicators for November on Monday, presenting a mixed economic picture.
Industrial production rose in line with expectations, slightly improving from October’s figures, signaling modest recovery in the industrial sector.
However, retail sales growth slowed sharply in November, missing forecasts and underscoring ongoing weakness in consumer spending.
In addition, home prices fell 5.7% year-over-year in November, following a 5.9% drop in October, reflecting continued struggles in the real estate market.
These figures pose a concern for global oil demand, as China is the world’s largest crude importer. The slowdown in retail activity points to fragile domestic consumption, which could weigh on energy demand. Meanwhile, the modest rise in industrial output indicates that manufacturing activity remains insufficient to significantly drive oil consumption.
Adding to the cautious mood, Beijing offered lukewarm signals regarding new stimulus measures last week.
Markets Brace for Fed Rate Decision
Investors are also holding back ahead of the Federal Reserve’s policy meeting this week. The Fed is widely expected to cut rates by 25 basis points but may signal a slower pace of reductions in 2025.The prospect of lower interest rates generally supports economic growth, which could potentially boost oil demand. However, uncertainty over the Federal Reserve’s future policy direction has led to some market hesitation.
This cautious sentiment is adding to the current weakness in oil prices, as traders await more clarity from the central bank’s upcoming meeting.
After strong gains last week, oil prices have come under pressure this week. Expectations of tighter oil markets due to stricter U.S. sanctions on Russia, coupled with hopes for new stimulus measures from China, had provided support to oil prices in the previous week.
