Oil prices slip despite Chinese interest rate cut; Gaza ceasefire in focus

July 22, 2024 10:48 PM AEST | By Investing

Oil prices slip despite Chinese interest rate cut; Gaza ceasefire in focus

Demand worries persist as China cuts interest rates to boost economy

Worries about slowing global growth weighing oil demand remained front and center after China, the world’s largest oil importer, unexpectedly lowered its benchmark loan prime rates earlier Monday, seeking to revive economic growth.

The cut comes just a week after data showed the Chinese economy grew less than expected in the second quarter, raising concerns over a potential slowdown in the country’s appetite for crude.

Beijing has vowed to unlock more stimulus measures to help shore up growth, with Monday’s cuts coming as part of these promises. But China’s LPR is already at record lows, as the country loosened monetary policy drastically over the past two years to help support growth.

The jitters over demand come just as some on Wall Street warn of a potential supply surplus next year.

Oil market in surplus next year - Morgan Stanley (NYSE:MS)

The crude oil market is currently tight but next year will likely be in surplus, with Brent prices declining into the mid-to-high $70s range, Morgan Stanley said.

The tightness will hold for most of the third quarter, the bank said in a note dated July 19, but equilibrium will return by the fourth quarter, "when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth."

Morgan Stanley said it expects OPEC and non-OPEC supply to grow by about 2.5 million barrels per day in 2025, well ahead of demand growth.

Refinery runs are set to reach a peak in August this year, and unlikely to return to that level until July 2025, it said.

(Peter Nurse, Ambar Warrick contributed to this article.)

This article first appeared in Investing.com

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