U.S. Crude Oil Prices Decline Amid China's Soft Demand and U.S. Economy Concerns

On a recent Thursday, the price of U.S. crude oil exceeded $72 per barrel, having previously witnessed considerable gains throughout the year. However, it has since experienced a significant decline due to soft demand in China and concerns regarding the U.S. economy. As a result, the U.S. benchmark has seen only a modest increase of 0.91% for the year, while the global benchmark, Brent crude, has erased all gains for the year 2024.

The impact of revised job growth

The downward trend in oil prices was further exacerbated on Wednesday when the U.S. job growth figures were significantly revised downward, raising apprehensions about the robustness of the world's largest economy. Despite this, Daan Struyven, the head of oil research at Goldman Sachs, expressed greater concern regarding the demand outlook in China, indicating that it poses a more pronounced threat to the global market.

China's oil demand growth

Daan Struyven revealed to CNBC that oil demand in China experienced a growth of 200,000 barrels per day (bpd) in the first half of 2024 compared to the same period in the previous year. This figure is three times lower than the average growth of 600,000 bpd observed from 2016 to 2019, exemplifying a significant decline in China's oil consumption.

As of now, the prices for energy products are as follows: the West Texas Intermediate October contract is priced at $72.28 per barrel, reflecting an increase of 35 cents or 0.49%. Year-to-date, U.S. crude oil has experienced a modest gain of 0.91%. Meanwhile, the Brent October contract is priced at $76.51 per barrel, exhibiting an increase of 46 cents or 0.6%. On a year-to-date basis, the global benchmark has observed a slight pullback of 0.67%. Additionally, the RBOB Gasoline September contract is priced at $2.21 per gallon, showing a negligible increase of almost 1 cent or 0.41%. Year-to-date, gasoline prices have risen by 5.3%. The Natural Gas September contract is priced at $2.14 per thousand cubic feet, reflecting an increase of nearly 3 cents or 1.29%. However, year-to-date, natural gas prices have declined by 14.5%

The impact of shifting energy sources

The slowdown in China's oil demand can be attributed, in part, to the transition from gasoline-powered vehicles to electric vehicles, as well as the shift from diesel to liquefied natural gas for trucks. While some of this slowdown can be anticipated due to China's reduced GDP growth and the rapid adoption of electric vehicles, Struyven noted that the switch to liquefied natural gas from diesel was an unexpected development.