Oil prices drop after China stimulus disappoints
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The news: Oil prices fell over 3% on Monday after China's new stimulus measures unveiled late last week failed to meet investor expectations for boosting fuel demand.
The numbers: Brent crude dropped to USD71.78 ($109.28) a barrel, while WTI fell to USD68.17. A stronger US dollar, bolstered by anticipation of upcoming inflation data and Federal Reserve commentary, further weighed on prices.
The context: China's consumer inflation data, released Saturday showed the weakest growth in four months, with deepening producer price deflation, underscoring sluggish economic momentum.
Late on Friday, the second-largest economy announced a 10 trillion yuan debt package to help local governments swap “hidden” debts, disappointing markets looking for direct economic stimulus measures.
Saudi Arabia's decision to reduce oil exports to China in December contributed to market pessimism as it was taken as a sign of weak demand.
Oil prices also eased as concerns over storm Rafael's impact on US Gulf oil supply subsided, even as over a quarter of the region's oil production remained offline, Reuters reported citing the offshore energy regulator.
What they said: PVM oil analyst Tamas Varga said the recent support measures won't revitalize China's oil demand growth.
"After last week's US presidential election, attention is slowly drifting back to the underlying fundamentals," Varga said.
