Crude Oil Soars on US Rate Cuts and Tight Supply, But China’s Economic Slowdown Looms

Crude oil prices surged due to US interest rate cuts and tightening global supply, despite concerns over China’s slowing economy. US crude inventories fell, signaling tighter supply, while overall petroleum demand remained subdued. Major financial institutions lowered China’s 2024 growth forecasts to 4.7%, citing weak industrial output and retail sales, increasing the likelihood of missing the government’s target. Despite a recent rally sparked by the Fed’s rate cut, oil prices continue to trend in a bearish channel, with key levels hinging on market momentum.

On September 20, 2024, crude oil ended the week with a notable gain of over 4.0%, fueled by several key factors. The significant US interest rate cut and declining global crude stockpiles provided strong upward price momentum. The US Federal Reserve’s rate cut is expected to stimulate economic activity and energy demand, reinforcing bullish sentiment in the market. Additionally, falling US crude inventories added further support, with expectations of continued tightness in supply as export activity rebounds. However, concerns over weak demand from China’s slowing economy continue to temper the broader outlook for crude prices.

Analysts foresee further price support in the coming months, with predictions of Brent crude returning above $80 per barrel as global supply constraints persist. Meanwhile, geopolitical tensions in the Middle East are also contributing to price strength as rising regional risks elevate concerns over potential supply disruptions. Despite these bullish factors, market participants remain mindful of persisting economic uncertainties related to China’s decelerating industrial output and weakened consumption.

During the week ending September 13, 2024, US refinery inputs averaged 16.5 million barrels per day, reflecting a slight decline from the previous week. Refinery capacity utilization stood at 92.1%, with gasoline production increasing and distillate fuel output declining. Crude oil imports dropped significantly, while inventories painted a mixed picture. Commercial crude oil inventories fell by 1.6 million barrels, placing them 4% below the five-year average, signaling tighter supply. Meanwhile, gasoline and distillate inventories saw modest gains, and propane stocks rose above historical levels.

Over the past month, total petroleum product demand remained subdued, down 2.7% from last year, with gasoline demand slightly increasing and distillate and jet fuel consumption softening. These dynamics reflect a complex interplay between supply constraints and evolving demand patterns in the energy market.

According to a recent report by Reuters, Goldman Sachs and Citigroup have both revised their 2024 growth forecasts for China’s economy down to 4.7%, driven by disappointing industrial output and retail sales data from August. The latest figures show industrial growth slowing to its weakest level in five months while retail sales continue to underperform, further highlighting the challenges in China’s economic recovery.

Previously, Goldman Sachs had projected 4.9% growth for the year, and Citigroup had estimated 4.8%. With the risk of China missing its official growth target of around 5% now more apparent, both institutions emphasize the growing need for additional stimulus measures to support demand. Citigroup also reduced its 2025 growth forecast to 4.2%, citing a lack of strong domestic demand drivers and calling for a more robust fiscal policy to break the current economic inertia.

Since July 5, crude oil prices have been trending within a bearish regression channel, remaining below the 50-period Exponential Moving Average (EMA). The recent rebound from the $65.07 low was primarily driven by last week’s 50 basis point rate cut by the Federal Reserve, which provided short-term upward momentum. However, this move lacks confirmation from key technical indicators such as the Momentum Oscillator and Relative Strength Index (RSI), indicating potential weakness in the rally.

If sellers maintain control of the market, downward price targets may include $67.82, $65.07, and $61.88. Conversely, should bullish momentum gain traction, traders may shift their focus to potential upward targets at $73.57, $74.64, and $77.75.market’s

Crude oil prices surged over 4% due to US rate cuts and tightening supply, despite weak demand from China’s slowing economy. Falling US crude inventories and geopolitical tensions further supported prices. Major financial institutions lowered China’s 2024 growth forecast to 4.7%, citing weak industrial output and retail sales. Despite a recent rally, crude oil remains in a bearish trend, with key price levels hinging on market momentum and future economic developments.