Oil prices skidded to levels last seen before the Ukraine war as China unexpectedly cut interest rates in an attempt to revive its flagging economy.
Brent crude fell by more than 5 per cent to as low as $92.78 a barrel after the central bank in Beijing acted amid further evidence of growth being hobbled by the country’s zero-Covid policy.
Oil topped $130 earlier this year as sanctions were imposed on Russia after it invaded Ukraine.
Brent crude fell by more than 5 per cent to as low as $92.78 a barrel after the central bank in Beijing cut interest rates in an attempt to revive its flagging economy
But deepening fears for the world economy have weighed on the price in recent weeks.
The latest fall saw Brent hit its lowest level since before the Kremlin’s tanks rolled into Ukraine on February 24.
That could provide a glimmer of hope for hard-pressed motorists who have seen petrol prices hit record levels – if the fall filters through to forecourts.
Disappointing figures yesterday from China, the world’s second biggest economy, added to the pressure on oil, as well as weighing on industrial metals such as copper, tin and nickel. The data showed year-on-year growth of 3.8 per cent in industrial output and 2.7 per cent in retail sales.
That fell short of hopes for a bounce-back after a dismal April-June quarter.
Meanwhile in the property sector, investment fell by 12.3 per cent and new sales tumbled 28.9 per cent.
The nationwide jobless rate fell slightly but youth unemployment remained stubbornly high, hitting a record 19.9 per cent.
President Xi’s government has been trying to throttle Covid outbreaks through strict lockdowns but the policy has also suffocated growth.
In Shanghai, the country’s financial hub, they had a particularly heavy impact and while now emerging fitfully from the worst of the restrictions, the city remains subject to a strict testing regime.
Other parts of the country are still being squeezed by lockdowns and a separate crisis in the debt-laden property sector – where some homebuyers are refusing to pay mortgages on properties that developers cannot finish – is also dragging on the economy.
Experts at ING bank cut their forecast for GDP growth this year from 4.4 per cent to 4 per cent. China is now looking set to miss its official target – of 5.5 per cent growth – for the first time since 2015.
The stuttering performance prompted the People’s Bank of China to cut the rate of some one-year loans to financial institutions from 2.85 per cent to 2.75 per cent and a separate rate for providing short term funding to banks from 2.1 per cent to 2 per cent.
The move took markets by surprise as the central bank had signalled a more vigilant approach to keeping a lid on inflation in a recent report.
Elsewhere in the world, including the UK, borrowing rates are being jacked up sharply to try to cool spiralling consumer prices.
Julian Evans-Pritchard, senior China economist at Capital Economics, said: ‘The July data suggest that the post-lockdown recovery lost steam as the one-off boost from reopening fizzled out and mortgage boycotts triggered a renewed deterioration in the property sector.
The People’s Bank of China is already responding to these headwinds by stepping up support.
‘But with credit growth proving less responsive to policy loosening than in the past, this probably won’t be sufficient to prevent further economic weakness.’
Analysts at Nomura said China’s growth in the second half of the year would be ‘significantly hindered by its zero-Covid strategy, the deteriorating property sector, and a likely slowdown of export growth’.
‘Beijing’s policy support could be too little, too late and too inefficient,’ they added.
The fall in the oil price hit the share prices of BP, which fell 1.2 per cent, or 5.05p, to 425.5p, and Shell, down 1.5 per cent, or 33p, at 2182p.
- Russia has reopened its bond markets to foreign investors for the first time in nearly six months – but only to those who are ‘not hostile’ to Moscow, thought to include China and Turkey. Russia closed its stock and bond markets in the hours after February’s invasion of Ukraine, which saw Western nations impose economic sanctions.