A barrel of Brent crude fell about 5 percent below $94 (78 pounds) on Monday, touching the lowest levels since Russia’s invasion of Ukraine as traders reacted to weaker data from the world’s second-largest economy. China’s central bank unexpectedly cut interest rates on its key lending facilities for the second time this year after disappointing official growth data. Factory output in the country’s industrial sector rose 3.8 percent in July from a year earlier, below analysts’ forecasts of 4.6 percent growth in a Reuters poll. Retail sales rose 2.7% from a year earlier, again well below expectations, as China’s economic recovery from pandemic lockdowns earlier this year showed signs of exiting. China’s economy narrowly escaped contraction in the second quarter, which was limited by the lockdown of commercial hub Shanghai and a deepening downturn in the property market, as well as persistently weaker levels of consumer spending. The country’s property sector, rocked by a mortgage boycott as thousands of homebuyers refuse to keep up with payments for unfinished flats bought off-plan, also weakened in July. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Julian Evans-Pritchard, senior China economist at consultancy Capital Economics, said: “We believe the outlook will remain challenging over the coming months as exports turn from a tailwind to a headwind, the property slump deepens and virus disruptions remain repetitive. “ As one of the world’s biggest energy consumers, weaker growth in the Chinese economy would limit demand for crude and other natural resources. Energy traders are also weighing the possibility of a nuclear deal between Iran and Western negotiators that could pave the way for an increase in oil supply. The global price of oil has retreated from a high near $140 in March, when concerns about supplies from Russia peaked. However, prices remain historically high as the war in Ukraine continues, nearly 50% above levels seen in late 2019. Rising energy prices have been the biggest driver of high inflation in the UK and other advanced economies amid a deepening cost-of-living crisis. Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB, said it was clear that weakness in Chinese oil demand was one of the main reasons oil prices had fallen since early June. “There is little hope that China will change its stance on Covid-19 anytime soon and there is a big risk that weakness in Chinese demand will continue amid continued rolling month-to-month lockdowns,” he said.
