Oil experienced its largest intraday decline in three weeks due to concerns about the Chinese economy and weaker equity trading in Europe.
West Texas Intermediate dropped 1.9% to approach $80, with European equity markets trading lower and the dollar strengthening for a second consecutive day, both acting as obstacles for crude.
The decline followed data indicating a sluggish outlook for the world’s largest oil importer, as the nation’s economic growth slowed to its lowest pace in five quarters.
Key timespreads have also softened recently, with gasoline premiums over crude falling to their lowest levels in almost a month.
Although oil remains up for the year, it has mainly fluctuated between $75 and $95 as OPEC+ supply cuts compete with a cautious view on Chinese consumption.
This has led to volatility dropping to multiyear lows ahead of this week’s Third Plenum, which establishes broad economic and political policies.
“Markets have experienced the summer doldrums, especially oil,” said Tamas Varga, an analyst at brokerage PVM Oil Associates.
Meanwhile, European natural gas futures have stabilized around €31 to €32 per megawatt-hour, remaining close to their lowest levels since mid-May, due to ample storage levels and reduced regional demand.
Storage facilities in Europe are at about 80% capacity as summer peaks and increased output from wind farms have also helped lower gas demand from power plants.
However, potential risks like reduced Russian flows through Ukraine or a surge in European gas demand could lead to price hikes.
Freeport LNG announced plans to restart one of its three liquefied natural gas trains this week at its Texas facility after repairing damage from Hurricane Beryl.
The LNG exporter intends to restart the remaining two trains shortly after the first resumes operations but production will be limited while repairs continue.
“The market remains cautious due to risk factors, particularly in LNG supply,” noted analysts at Engie’s EnergyScan.
In the UK, there are currently no LNG vessels expected in the coming weeks, according to consultancy Auxilione.
Data from Gas Infrastructure Europe (GIE) showed that European gas storage facilities are currently 81% full.
Russian natural gas exports via pipelines to EU countries increased by 24% in the first half of the year compared to the same period in 2023, as reported in a July study by GECF.
- Reporting by Bloomberg, Reuters, and the Irish Examiner
