Oil Prices Plummeted by More Than Seven Percent Last Week

After two weeks of growth, oil prices on international markets fell by more than seven percent last week, primarily influenced by the slowdown in China’s economic growth, which is the world’s largest oil importer.

The price of Brent crude oil on the London market dropped by more than 7 percent last week, to $73.06. At the same time, the price of WTI crude oil on the American market decreased by nearly 8 percent, to $69.22, marking the largest weekly price drop since September 2.

In China, the world’s largest oil importer, the economy grew at its slowest pace since the beginning of 2023 in the third quarter, although September consumption and industrial production exceeded expectations. Meanwhile, refinery production in China has fallen for the sixth consecutive month, as low refining margins and weak fuel consumption have limited processing.

– We cannot overlook the impact of electric vehicles in China. There are various factors at play, primarily economic weakness in China, but also a shift towards the electrification of transport – stated Neil Atkinson, an independent energy analyst and former head of the oil department at the IEA. Sales of electric vehicles in China surged by 42 percent in August, reaching a record level of over one million vehicles.

In the meantime, the Chinese central bank has launched two financing schemes through which it will initially inject 800 billion yuan ($112.38 billion) into the stock markets through newly created monetary policy tools to stimulate faster economic growth.

– Chinese data shows temporary signs of improvement, but recent briefings on additional economic stimulus surprised market participants – said Rishi Rajanala, an associate at Aegis Hedging.

On the other hand, negotiations are underway in the Middle East to ease tensions. U.S. President Joe Biden said on Friday that there is a possibility of addressing the situation with Israel and Iran in a way that could potentially end their conflict in the Middle East for some time.

– We have lost additional parts of the geopolitical risk premium in oil prices, as discussions suggest that everything has reached a breaking point – said Kilduff from Again Capital.

The drop in prices was also influenced by record U.S. crude oil production, which, according to the Energy Information Administration, increased by 100,000 barrels per day (bpd) in the previous week, to 13.5 million barrels per day.