Oil prices retreated on Tuesday, due to concerns about slowing global economic activity, even as supply is still tight in the market.
At 12:00 p.m. ET, U.S. crude oil prices were down 3.48% at $81.56 a barrel, while Brent crude was down 2.85% at $89.09 a barrel on the futures market, the lowest level in two weeks, because of uncertainty about global demand.
Doubts about the demand outlook in China increased last week after the biggest oil-importing country delayed the release of economic indicators, including the much-awaited Gross Domestic Product, which was scheduled for Tuesday.
This prompted speculation that the growth figures could embarrass the Beijing authorities during the Communist Party congress, and raised questions about the predictability and transparency of information in the world’s second largest economy.
In Europe, German investor sentiment showed less pessimism than expected in October, with the ZEW survey institute’s economic sentiment index registering a slight rise in the month.
However, what ultimately dented the trading tone was the current conditions index, which plummeted to its lowest level since the start of the pandemic.
On the supply side, the American Petroleum Institute will release its weekly estimate for US inventories today, and the figure will be closely watched, after last week’s large build of 7 million barrels.
In addition, the Biden administration plans to sell oil from the U.S. Reserve Strategy before the congressional elections next month, according to a Reuters report.
The announcement, which aims to reduce oil prices, should be made later this week, with the sale of the remaining 14 million barrels of the program, the largest amount since the release of the 180 million barrel reserve began in May.
This move is in line with the recent decision by the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, to cut supply by more than 2 million barrels a day.
In addition, the European Commission has proposed another set of emergency measures to address rising energy prices, but an immediate cap on gas prices seems unlikely in light of the bloc’s division over the idea.
German Chancellor Olaf Scholz said he would allow the three nuclear reactors scheduled to shut down in December to continue operating until April.