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Oil Dips on Worries China Stimulus Plans Not Enough to Boost Demand

FILE PHOTO: The PetroChina logo is seen near a car charging at the Chinese state oil giant's electric vehicle (EV) charging station in Beijing, China February 2, 2024. REUTERS/Florence Lo/File Photo
FILE PHOTO: The PetroChina logo is seen near a car charging at the Chinese state oil giant's electric vehicle (EV) charging station in Beijing, China February 2, 2024. REUTERS/Florence Lo/File Photo
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Oil Dips on Worries China Stimulus Plans Not Enough to Boost Demand

FILE PHOTO: The PetroChina logo is seen near a car charging at the Chinese state oil giant's electric vehicle (EV) charging station in Beijing, China February 2, 2024. REUTERS/Florence Lo/File Photo
FILE PHOTO: The PetroChina logo is seen near a car charging at the Chinese state oil giant's electric vehicle (EV) charging station in Beijing, China February 2, 2024. REUTERS/Florence Lo/File Photo

Oil prices fell on Wednesday as investors reassessed the ability of China's stimulus plans to boost the economy enough to drive more fuel demand growth in the world's largest crude importer.
Brent crude futures were down 19 cents, or 0.25%, at $74.98 a barrel at 0700 GMT. US West Texas Intermediate crude was down 28 cents, or 0.39%, at $71.28 per barrel, Reuters reported.
Prices rose about 1.7% on Tuesday after China announced its most aggressive economic stimulus since the COVID-19 pandemic, with interest rate cuts and government funding.
Analysts, however, warned that more fiscal help was needed to boost confidence in the world's second-largest economy and that eroded the initial impact on oil prices.
"The lack of a more concrete fiscal approach still instils some reservations over whether the economic boost can be sustained," said Yeap Jun Rong, market strategist at IG.
Yeap said there was an overall lack of traction to the oil market, with trades lower than usual, which was likely also due to a drop in US consumer confidence. It fell in September to its lowest in three years, with particular concern about the availability of jobs.
Still, declining US crude oil and fuel stockpiles provided some support for the market, which has generally risen since prices hit their lowest since 2021 on Sept. 10.
US oil stockpiles dropped by 4.34 million barrels last week while gasoline inventories fell by 3.44 million barrels and distillate stocks fell by 1.12 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday.
An intensifying conflict in the Middle East between Iran-backed Hezbollah in Lebanon and Israel also supported crude prices, with cross-border rockets launched by both sides increasing fears of a broadening war in the key producing region.
A hurricane threatening the US Gulf Coast has changed course towards Florida and away from oil and gas-producing areas near Texas, Louisiana and Mississippi.

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US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
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US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)

The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.
The Commerce Department reported that the nation's gross domestic product — the nation's total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year, The Associated Press reported.
Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.
The final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.
The US economy, the world's biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.
Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America's employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.
Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.
Some other barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.
And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.
A category within GDP that measures the economy’s underlying strength rose at a healthy 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.
Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30.