Oil-Production Cuts Indicate Slowdown in Chinese Economy
Washington, DC, September 6, 2023-"An extension of oil-production cuts by two of the world’s largest crude exporters Tuesday hardened Wall Street’s fears that the Chinese economy has hit a rough patch that could slow global growth,” according to the Wall Street Journal.
“Russia and Saudi Arabia surprised many investors by curtailing output through the end of the year, pushing oil prices to their highest levels of 2023. Benchmark U.S. crude gained more than 1.3%, closing at $86.69 a barrel. Energy was the S&P 500’s best-performing sector.
“Economic concerns weighed on stocks Tuesday, with major indexes wavering between small gains and losses for much of the day before finishing in the red. The S&P 500 slipped by 0.4%, while the tech-heavy Nasdaq Composite edged 0.1% lower. The Dow Jones Industrial Average fell by 0.6%, or about 196 points.
“The yield on the benchmark 10-year Treasury rose to 4.267%. Yields on 2-year Treasurys, a rough indicator of traders’ short-term inflation expectations, climbed to 4.966%.
“Oil’s gains could be short-lived. Some analysts warned that attempts by Riyadh and Moscow to tighten the market-and bolster their national budgets-signal that there is limited upside for Chinese demand and little appetite from Beijing for the type of infrastructure investments required to juice it.
“‘That’s what the market wants from the Chinese, but it doesn’t look like it’s going to happen,’ said Robert Yawger, executive director of energy futures at Mizuho Securities. ‘They have no dry powder, basically.’
“The direction of the Chinese economy is crucial for global commodity markets. Since the beginning of this year, the country’s start-and-stop postpandemic rebound has helped upend many traders’ projections that it would gobble up more supplies.”