China Economic Data Plummets International Oil Prices
By KELIN DILLON
Crude oil prices dipped down more than $4 a barrel on Monday, Aug. 15, to the same market levels seen before the Ukrainian invasion, a trend prompted by the release of disappointing economic data from China – the world’s biggest crude oil importer – that very same day.
The price of a barrel of U.S. West Texas Intermediate (WTI) dropped 4.91 percent, or $4.52, to $87.57 dollars a barrel on Monday as a result, while the Mexican Export Mix fell 3.36 percent to $84.79 dollars per barrel.
According to Monex financial group general director Janette Quiroz, the decline in crude oil costs can be explained by the fact that concerns about the looming global economic recession currently supersede the international demand for energy.
China’s recently released numbers only exacerbated these economic fears, showing that the country’s industrial production only grew by 3.8 percent and retail sales by just 2.7 percent, far below the respective 4.6 and 5 percent forecasts previously anticipated by the market.
The Central Bank of China took things one step further, slashing interest rates to stimulate the economy in the first move of its kind since January.
“We must be aware that the risks of stagflation in the world economy are increasing and the foundations for the recovery of the economy have not yet been consolidated,” said the China Bureau of Statistics at the time.
A pending deal between Iran and the European Union has the potential to increase international oil supply by between 1.3 to 1.4 million barrels of crude oil per day, which would help relieve the void of Russian oil imports and further relieve market pressure.
“The price of oil going down helps Mexico, it will give the opportunity for the government to collect more taxes from the Special Tax on Production and Services (IEPS) of gasoline, make another adjustment next week and this will trigger a little more money,” said economic expert Eduardo Torreblanca.
Other experts pointed out that the drop in crude oil prices could continue to be positive for Mexico as it could help relieve the economic pressures of inflation.