Crude oil prices in the United States experienced a significant dip on Tuesday as weak global economic data took precedence over concerns about the Israel-Hamas war potentially escalating into a broader regional conflict. This downward trend brought prices to their lowest point since July. The drop in prices was fueled by mixed economic data from China, which reported an increase in crude oil imports but a sharp decline in overall exports, indicating a softening global demand.
China, the world’s second-largest economy, saw a 6.4% drop in exports in U.S. dollar terms for October compared to the same period last year. This decline exceeded the predicted 3.3% drop projected by a Reuters poll. China’s exports have been consistently falling for six consecutive months, largely influenced by higher interest rates causing downward pressure on the global economy.
Minneapolis Federal Reserve President, Neel Kashkari, dampened expectations of a potential rate cut by stating that the central bank needed to bring inflation back down to 2% over a reasonable timeframe. However, Kashkari admitted uncertainty regarding the exact measures required, indicating that the economy would provide guidance. This statement led to further concerns about the strength of the global economy and its impact on oil prices.
The impact of oil output cuts by Saudi Arabia and Russia, which were announced earlier in the week, was overshadowed by China’s economic data. Despite confirming their commitment to maintaining these cuts until the end of the year, the positive effect on oil prices was limited due to the prevailing concerns about the global economy.
Initially, crude oil prices had spiked following Hamas’ devastating terrorist attacks on Israel due to concerns that the conflict could disrupt oil supply and escalate into a broader regional conflict. However, since mid-October, prices have been on a downward trajectory as immediate-term worries about the conflict spreading have eased.
The weak global economic data, specifically China’s decline in exports and concerns raised by the U.S. Federal Reserve, have had a significant impact on crude oil prices. These factors overshadowed the positive effect of oil output cuts and concerns about the Israel-Hamas conflict. As the global economy continues to face challenges, the future of oil prices remains uncertain.