WTI plummets as surprise PBoC rate cuts raise uncertainty over China’s economic outlook

• The Oil price dives further amid growing concerns over China’s economic outlook.
• The PBoC surprisingly reduced its Loan Prime Rate by 10 bps.
• Kamala Harris’s nomination for Democrats’ leader has increased US political uncertainty.

West Texas intermediate (WTI), futures on NYMEX, extends its downside below $78.00 in Monday’s American session. The Oil price weakens as an unexpected decision by the People’s Bank of China (PBoC) to cut its benchmark rates has pointed to concerns over the China’s economic outlook. China is the world’s largest Oil importer and an uncertainty over its economic prospects is an unfavorable situation for the Oil price.

The PBoC lowered its one-year and five-year Loan Prime Rate (LPR) by 10 basis points to 3.35% and 3.85%, respectively. It is expected that the rate-cut move from the PBoC has come due to weaker-than-expected Q2 Gross Domestic Product (GDP) growth rate. The data came in showed that the economy grew by 0.7%, slower than estimates of 1.1% and the former release of 1.5%.

Apart from growing demand concerns, easing fears of the Oil market remaining tight have also weighed heavily on the Oil price. A note from Morgan Stanley showed that it expects the supply from OPEC and non-OPEC players to grow by about 2.5 million barrels per day in 2025, well ahead of demand growth.

Meanwhile, the United States (US) political uncertainty has also weighed on the Oil price. According to market speculation, Doanld Trump-led-Republican is expected to win presidential elections. Trump has promised to increase US Oil production if he comes out victorious.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower as US Vice President Kamala Harris appears as nominee of Democrats.

Going forward, the Oil price will be influenced by preliminary S&P Global Manufacturing PMI data from various nations, which will indicate the global demand outlook.