© Reuters.
biedexmarkets.com — Oil prices fell Monday, retreating after early gains amid concerns about the economic health of China, the world’s largest crude importer.
By 09:25 ET (14.25 GMT), the futures traded 0.8% lower at $77.40 a barrel and the contract dropped 0.8% to $82.33 a barrel.
Evergrande liquidation hits sentiment
A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group (HK:), the world’s most indebted property developer, dealing another blow to investor confidence as China’s ailing real estate sector continues to weigh on its economy.
The health of the second largest economy in the world, and major energy market, has been a major concern in the wake of the COVID epidemic which hit China hard.
The official figures showed that the Chinese economy grew 5.2% last year. However, strip out deflation, and nominal growth was just 4.2%, which excluding the pandemic-hit growth of 2.7% in 2020, is the lowest annual number since 1976.
Elevated Middle East tensions
That said, these losses followed the crude benchmarks posting weekly gains of more than 6% last week, their biggest weekly increase since October after the start of the Israel-Hamas conflict in Gaza.
Tensions remain fraught in the region, especially after a drone attack on U.S. forces in Jordan over the weekend.
This attack was by Iran-backed militants, according to the U.S. President Joe Biden, and resulted in the death of three U.S. service members, the first deadly strike against U.S. forces since the Israel-Hamas war erupted.
Iran has denied involvement in the attack, but it does raise concerns of a more direct confrontation between the two countries, potentially resulting in regional energy supply disruptions in the oil-rich Middle East.
“The conflict in the Red Sea is likely to add shipping costs, transit time and risk premium for some of the crude oil shipments and is likely to support crude oil prices,” said analysts at ING, in a note.
Fed meeting in focus
Traders will also be keeping an eye on economic events this week, and in particular a potentially crucial policy-setting by the .
The Fed is widely expected to keep interest rates unchanged on Wednesday, but officials could provide indications that the battle against inflation has progressed sufficiently to begin cutting rates sooner rather than later.
There is also a lot of U.S. labor market data to study during the week, culminating with the January on Friday, with the economy expected to have added 177,000 new jobs, slowing from 216,000 the prior month.
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