Oil prices took a nosedive on Friday morning, with West Texas Intermediate (WTI) light crude futures plummeting by 3% to below $76 per barrel. This sharp decline was attributed to two key factors: the ongoing negotiations for a Gaza ceasefire and disappointing economic data released from China.
As negotiators work towards a ceasefire agreement in Gaza, traders remain on edge. Talks between Israel and mediators began on Thursday, and are set to reconvene in Doha, Qatar, on Friday. While a ceasefire agreement could help prevent further escalation in the region, concerns persist over the slow progress of negotiations and the possibility of further conflict. Hamas officials, who have accused Israel of stalling, did not attend Thursday’s talks.
Adding to the pressure on oil prices, China’s latest economic data revealed signs of a slowing economy. Industrial production grew by 5.1% year-on-year in July 2024, slightly missing market expectations of 5.2% and decelerating from a 5.3% increase in the previous month. This marks the third consecutive month of slowing industrial output growth, with July’s figures representing the weakest performance since March.
Furthermore, China’s surveyed unemployment rate edged up to 5.2% in July 2024 from 5% in the preceding three months, slightly exceeding market forecasts of 5.1%. Fixed-asset investment grew by 3.6% year-on-year from January to July 2024, falling short of both market expectations and the previous period’s growth rate of 3.9%.
On a more positive note, retail sales in China rose by 2.7% year-on-year in July 2024, marginally above market expectations of 2.6%. This figure shows an improvement from June’s 17-month low of 2.0% growth. On a monthly basis, retail activity increased by 0.35% in July, recovering from a revised 0.10% decline in the previous month.
The combination of these factors, including the uncertainty surrounding the Gaza ceasefire negotiations and the weakening Chinese economy, has contributed to the significant drop in oil prices. As the situation evolves, traders will continue to monitor these developments closely for any potential impact on global energy markets.
