Oil prices fall amid China demand woes, rate cut hopes

Investing.com-- Oil prices fell in Asian trade on Tuesday, weighed chiefly by signs of increasing economic weakness in top importer China, which could limit demand in the coming months.  

But losses in crude were still limited on the prospect of lower interest rates, especially as recent signals from the Federal Reserve ramped up bets on a September cut. 

Brent oil futures expiring in September fell 0.2% to $84.67 a barrel, while West Texas Intermediate crude futures fell 0.2% to $83.71 a barrel by 23:09 ET (03:09 GMT). 

Weak GDP, Trump presidency weigh on China outlook 

Sentiment towards top oil importer China soured this week after gross domestic product data showed the country’s economy grew less than expected in the second quarter.

Growth was seen slowing amid weak domestic consumption, a trend that is also expected to weigh on fuel and travel demand in the country. 

Import data for June showed China’s crude shipments fell sharply during the month, brewing more concerns over slowing demand.

Sentiment towards China was also soured by increased speculation that Donald Trump will win the 2024 U.S. presidential elections, especially after an assassination attempt on Trump appeared to have boosted his popularity.

Trump has maintained a largely negative rhetoric towards China. His administration had imposed steep trade tariffs against China, sparking a trade war between Washington and Beijing in the late-2010s. 

Rate cut hopes grow, but dollar resilient 

Losses in crude were limited by growing optimism over a September rate cut, especially after a slew of signals from Powell suggested the Fed was gaining more confidence in easing inflation. 

Lower rates foster increased economic activity, which bodes well for oil demand. Hopes of a soft landing for the U.S. economy, as inflation comes down, also present a stronger outlook for demand. 

The dollar dropped in recent weeks amid speculation over rate cuts, benefiting crude prices. But the greenback stemmed its losses on Monday, as markets also saw a Trump presidency as potentially boosting the dollar.

On the oil supply front, continued geopolitical disruptions in the Middle East and the Red Sea kept traders pricing in some risk premium into crude.