Oil’s main international benchmark dipped below $70 a barrel on Tuesday for the first time since the end of 2021, amidst growing concerns about slowing global growth.
Meanwhile, global stock markets differed as traders weighed the outlook for interest rates in the United States and Europe and anticipated the publication of new consumer inflation data on Wednesday.
Brent crude fell more than 3% to below $70 a barrel, while the key US contract, West Texas Intermediate (WTI), dropped during trading and concluded down more than 4%.
According to analyst Tamas Varga of PVM Oil Associates, the OPEC oil cartel revising its demand predictions lower was one reason for the dip, but not the main one, because the modifications were modest.
“Chinese economic woes — August crude oil imports fell seven percent on the year — and the growing belief that the Fed will only cut 0.25 percent next week weigh more heavily in the current sell-off,” he told AFP.
Swissquote analyst Ipek Ozkardeskaya said even mitigating factors like impending interest rate cuts and OPEC+ holding off on production increases was not enough to stem the downward trend.
“Oil bulls are not willing to swim against such a strong tide — and that also adds to the momentum,” she added.
Mixed US Equities
US equities finished mixed Tuesday, after Friday’s slump on the back of disappointing US jobs data, which rekindled fears the Federal Reserve had waited too long to begin cutting interest rates.
The Dow Jones Industrial Average finished down 0.2 percent, while the broad-based S&P 500 gained 0.5 percent, and tech-rich Nasdaq Composite Index rose 0.8 percent.
Traders were also keeping an eye on US politics on Tuesday, ahead of the sole scheduled debate between US presidential candidates Kamala Harris and Donald Trump.
Investors were also looking ahead to US consumer inflation data due Wednesday.
“Tomorrow’s US inflation figures could be the next key test of investor sentiment,” noted AJ Bell investment director Russ Mould.
The Federal Reserve is widely expected to cut US interest rates at next week’s meeting, but debate surrounds whether it will be by 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.
But Tuesday’s plunge in oil prices may indicate that those fears are outweighed by concern that policymakers are behind the curve.
“Financial markets have shifted their focus from bringing down inflation to shoring up economic growth,” said Saira Malik, chief investment officer at asset manager Nuveen.
“Market volatility has climbed amid downside surprises in macroeconomic data — especially labour market indicators,” she added.
Fresh concerns about China’s economy are lowering confidence, with mixed trade data doing little to assuage market fears.
China’s policymakers are now under pressure to announce new stimulus for the world’s second largest economy, but they have shown little enthusiasm to do so.
European markets began the day lower, with traders expecting a rate decrease from the European Central Bank later this week.
In Britain, official statistics released Tuesday showed wages rising at the slowest rate in two years, decreasing the likelihood of a Bank of England rate decrease next week.
Key figures around 2030 GMT
West Texas Intermediate: DOWN 4.3 percent at $65.75 per barrel (close)
Brent North Sea Crude: DOWN 3.7 percent at $69.19 per barrel (close)
New York – Dow: DOWN 0.2 percent at 40,736.96 points (close)
New York – S&P 500: UP 0.5 percent at 5,495.52 (close)
New York – Nasdaq Composite: UP 0.8 percent at 17,025.88 (close)
London – FTSE 100: DOWN 0.8 percent at 8,205.98 (close)
Paris – CAC 40: DOWN 0.2 percent at 7,407.55 (close)
Frankfurt – DAX: DOWN 1.0 percent at 18,265.92 (close)
Tokyo – Nikkei 225: DOWN 0.2 percent at 36,159.16 (close)
Hong Kong – Hang Seng Index: UP 0.2 percent at 17,234.09 (close)
Shanghai – Composite: UP 0.3 percent at 2,744.19 (close)
Euro/dollar: DOWN at $1.1023 from $1.1041 on Monday
Pound/dollar: UP at $1.3083 from $1.3075
Dollar/yen: DOWN at 142.44 yen from 143.11 yen
Euro/pound: DOWN at 84.25 pence from 84.42 pence