As of October 1, 2024, global oil prices are under pressure due to China's sluggish economic performance and its recent announcement of significant economic stimulus measures. Despite these efforts, which include interest rate cuts and liquidity support, analysts remain skeptical about their potential to substantially boost oil demand or prices. China's economic growth for the third quarter was reported at 4.7%, falling short of the 5% estimate, which has raised concerns about the country's demand for oil [b96e8798].
On the same day, China revealed its largest stimulus measures since the pandemic, including a 10 basis points cut in the 14-day reverse repo rate and a 20 basis points cut in the 7-day reverse repo rate, along with a 50 basis points reduction in the reserve requirement ratio [b7c712d9]. These measures are aimed at supporting the property sector, which constitutes about 30% of the economy, amidst a projected budget deficit of 6.2% of GDP for 2024 [b7c712d9].
However, China's ongoing shift towards less energy-intensive sectors and a preference for lower oil prices may limit the effectiveness of these stimulus measures on global oil demand. Analysts suggest that rising oil prices could harm global demand, particularly affecting the U.S. and allied nations [b7c712d9]. In September, oil prices fell by $6 per barrel, with ICE Brent trading at $73 and West Texas Intermediate (WTI) at $69 [b96e8798].
The upcoming U.S. presidential election on November 5 is also anticipated to influence oil prices, as political outcomes can affect energy policies and market dynamics [b96e8798]. Meanwhile, OPEC and its allies continue to maintain production cuts of 1.65 million barrels per day, a strategy expected to remain in place until the end of 2025 [b96e8798].
As the world's largest net importer of petroleum since 2013 and the largest gross crude oil importer since 2017, China's economic trajectory will play a crucial role in shaping global oil prices. Historical data indicates that a $10 increase in crude oil prices raises gasoline prices by 25-30 cents per gallon, and a 10 cent increase in gasoline prices correlates with a 0.6% decrease in presidential approval ratings in the U.S. [b7c712d9].
As the global market adjusts to these dynamics, the outlook for oil prices remains uncertain, with many factors at play influencing both supply and demand [b96e8798].