BUSINESS: BRENT CRUDE FALLS BELOW $70 PER BARREL

Read Time:3 Minute, 40 Second

Agency Report

Due to growing worries about slowing global growth, the key international benchmark for oil fell below $70 per barrel on Tuesday for the first time since the end of 2021.

As traders evaluated the prospects for interest rates in the US and Europe and anticipated the release of new consumer inflation data on Wednesday, stock markets around the world experienced divergence.

While West Texas Intermediate (WTI), the primary US contract, fell during trading and ended the day down more than four percent, Brent oil fell more than three percent to trade below the $70 per barrel mark.

Analyst Tamas Varga at PVM Oil Associates said the OPEC oil cartel revising its demand estimates lower was one reason for the fall, but not the main one as the changes were minimal.

“Chinese economic woes — August crude oil imports fell seven percent on the year — and the growing belief that the Fed will only cut 0.25 percent next week weigh more heavily in the current sell-off,” he told AFP.

Swissquote analyst Ipek Ozkardeskaya said even mitigating factors like impending interest rate cuts and OPEC+ holding off on production increases was not enough to stem the downward trend.

“Oil bulls are not willing to swim against such a strong tide — and that also adds to the momentum,” she added.

US equities finished mixed Tuesday, after Friday’s slump on the back of disappointing US jobs data, which rekindled fears the Federal Reserve had waited too long to begin cutting interest rates.

The Dow Jones Industrial Average finished down 0.2 percent, while the broad-based S&P 500 gained 0.5 percent, and tech-rich Nasdaq Composite Index rose 0.8 percent.

Traders were also keeping an eye on US politics on Tuesday, ahead of the sole scheduled debate between US presidential candidates Kamala Harris and Donald Trump.

Investors were also looking ahead to US consumer inflation data due Wednesday.

“Tomorrow’s US inflation figures could be the next key test of investor sentiment,” noted AJ Bell investment director Russ Mould.

The Federal Reserve is widely expected to cut US interest rates at next week’s meeting, but debate surrounds whether it will be by 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.

But Tuesday’s plunge in oil prices may indicate that those fears are outweighed by concern that policymakers are behind the curve.

“Financial markets have shifted their focus from bringing down inflation to shoring up economic growth,” said Saira Malik, chief investment officer at asset manager Nuveen.

“Market volatility has climbed amid downside surprises in macroeconomic data — especially labour market indicators,” she added.

Fresh worries about China’s economy are also dampening sentiment, with a mixed trade data doing little to soothe investor concerns.

China’s leaders are now facing pressure to unveil fresh stimulus for the world’s number two economy, although they have so far shown little appetite for doing so.

European stocks finished the day lower, as traders anticipated a European Central bank rate cut later in the week.

And in Britain, official data published Tuesday showed wages grew at the slowest pace in two years, reducing the chances of a Bank of England rate cut next week.

West Texas Intermediate: DOWN 4.3 percent at $65.75 per barrel (close)

Brent North Sea Crude: DOWN 3.7 percent at $69.19 per barrel (close)

New York – Dow: DOWN 0.2 percent at 40,736.96 points (close)

New York – S&P 500: UP 0.5 percent at 5,495.52 (close)

New York – Nasdaq Composite: UP 0.8 percent at 17,025.88 (close)

London – FTSE 100: DOWN 0.8 percent at 8,205.98 (close)

Paris – CAC 40: DOWN 0.2 percent at 7,407.55 (close)

Frankfurt – DAX: DOWN 1.0 percent at 18,265.92 (close)

Tokyo – Nikkei 225: DOWN 0.2 percent at 36,159.16 (close)

Hong Kong – Hang Seng Index: UP 0.2 percent at 17,234.09 (close)

Shanghai – Composite: UP 0.3 percent at 2,744.19 (close)

Euro/dollar: DOWN at $1.1023 from $1.1041 on Monday