Crude oil prices eased on Tuesday following the release of negative economic news from Germany and China ahead of the US Federal Reserve decision on interest rates.
Brent futures fell by 72 cents or 1.0 per cent to settle at $73.19 a barrel while the US West Texas Intermediate (WTI) crude slipped by 63 cents or 0.9 per cent to $70.08 per barrel.
In China, the world’s second-biggest economy, industrial output growth quickened slightly in November, while retail sales disappointed.
This has spurred calls for the Chinese government to ramp up consumer-focused stimulus as policymakers brace for more US trade tariffs once President-elect Donald Trump takes office for a second time in January.
China is the world’s largest oil importer and market analysts note that the economic situation may dampen oil demand.
Also in Germany, Europe’s largest economy, business morale worsened more than expected in December, a survey showed on Tuesday.
The Ifo Institute said its business climate index decreased to 84.7 in December from a slightly downwardly revised 85.6 the previous month.
This development was weighed down by companies’ pessimistic assessment of the coming months amid geopolitical uncertainty and an industrial slump.
Meanwhile, a separate survey released by the ZEW Institute showed investors were much more optimistic, largely pinning their hopes on a change in government following the upcoming February 23 election.
Market analysts noted that 2024 will mark the second straight year that Germany will stagnate economically.
In the world’s biggest economy, US retail sales increased more than expected in November amid an acceleration in motor vehicle and online purchases.
The report from the US Commerce Department did not impact expectations that the US Federal Reserve would cut interest rates on Wednesday for the third time since the central bank initiated its policy easing cycle.
After hiking rates aggressively in 2022 and 2023 to tame a surge in inflation, the US Federal Reserve started to lower rates in September.
Lower rates decrease borrowing costs, which can boost economic growth and oil demand.
The US central bank meeting will conclude on Wednesday and the market will confirm if it goes with the 25 basis points cut expectation.
Crude oil inventories in the US fell by 4.7 million barrels for the week ending December 6, according to the American Petroleum Institute (API). For the week prior, the API reported a 499,000-barrel build in crude inventories.
So far this year, crude oil inventories have fallen by roughly 8 million barrels since the beginning of the year, according to API data.
Official data from the Energy Information Administration (EIA) will be released later on Wednesday.