Oil prices settled down nearly 2% on Friday, with Brent crude closing at $79.68 per barrel and U.S. West Texas Intermediate (WTI) at $76.65 per barrel. This decline was influenced by disappointing economic data from China, which showed a significant slowdown in industrial output, a sharp fall in new home prices, and rising unemployment.
China, the world’s top oil importer, has seen its economy lose momentum in July, with new home prices falling at the fastest pace in nine years. Industrial output has slowed, and unemployment has risen, feeding worries about a slump in demand for crude oil. Refineries in China have also sharply cut crude processing rates last month due to tepid fuel demand.
The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for this year’s oil demand growth earlier this week, citing softness in China. The International Energy Agency (IEA) also slashed its 2025 demand forecasts, pointing to weak demand in China.
Andrew Lipow, president of energy consultancy Lipow Oil Associates, remarked on the volatility in oil markets, with fears of supply disruptions due to geopolitical tensions in the Middle East and slowing growth in China forcing revisions of demand forecasts. Oil futures initially rallied due to concerns over potential retaliation by Iran against Israel, but the risk was priced out as Iran has not taken any action yet.
Despite concerns over potential supply disruptions, actual disruptions have been minimal. Analysts from Commerzbank Research noted that the market is currently more focused on the demand side. A fresh round of Gaza ceasefire talks, which began on Thursday in Qatar, was paused until next week, with mixed signals on progress.
Positive economic data from the U.S. provided some support to oil prices. Retail sales beat analysts’ expectations, and fewer Americans filed new jobless claims last week, sparking renewed optimism about economic growth in the largest oil market.
