Oil prices fall ahead of Fed meeting; soft Chinese economic data weighs

Oil prices fell Tuesday, hit by concerns over leading importer China's economic health as well as caution ahead of the last Federal Reserve policy meeting of the year.

At 08:40 ET (13:40 GMT), Brent Oil Futures traded 1% lower to $73.20 a barrel, while Crude Oil WTI Futures  traded 1.6% lower to $69.56 a barrel. Weak Chinese data clouds demand outlook

Sentiment in the crude market has been hit by data illustrating China's economic weakness, suggesting demand may be below expectations next year from the world's largest oil importer. 

Industrial output increased as expected, slightly surpassing October's growth and indicating modest industrial sector improvement. 

However, retail sales growth decelerated sharply in November, undershooting expectations and highlighting persistent weaknesses in consumer spending. 

Moreover, home prices declined by 5.7% year-over-year in November, following a 5.9% drop in October, highlighting ongoing challenges in the real estate sector.

These indicators raise concerns for the oil market, as the slowdown in retail sales reflects fragile domestic demand, potentially dampening energy consumption. Additionally, the modest increase in industrial output suggests that manufacturing activities are not robust enough to significantly boost oil demand.  Markets cautiously await Fed rate decision

Markets were also cautious before a Fed meeting this week, where the central bank is widely expected to trim rates by 25 basis points but also flag a slower pace of cuts for 2025.

The prospect of lower interest rates typically supports economic growth, potentially boosting oil demand. However, uncertainty surrounding the pace of the Fed's future interest rate policy cuts have introduced a degree of market hesitation. 

This cautious sentiment is also contributing to the current softness in oil prices, as traders await clearer signals from the central bank's upcoming meeting, set to conclude on Wednesday.

After hefty gains last week, oil prices have remained under pressure this week. The potential for tighter oil markets in the face of stricter US sanctions on Russia, and expectations of new stimulus measures from China had provided support to the oil prices last week.

(Peter Nurse contributed to this article.)

Source: Investing.com