Worldwide oil prices dropped roughly two percent on Monday after a comparable fall on Friday, driven by investor disappointment with the Chinese government’s weak economic stimulus plan. Another bad sign for the Chinese economy was the disappointing “Single’s Day” online shopping holiday, which posted some of its lowest sales numbers since the event began in 2009. Price Futures Group senior analyst Phil Flynn told Reuters on Monday that the Veterans Day holiday in the United States, and the election of Donald Trump last week, could also be factors in reduced oil prices.
Veterans Day slowed trading for a day, while Trump’s promise to “drill, baby, drill” may have “taken away some incentive to go long,” according to Flynn. Traders are also mindful that the Organization of the Petroleum Exporting Countries (OPEC) is planning to increase production soon, bringing long-term pricing forecasts down. Sources within OPEC+, the grouping that includes Russia, said in late October that they might delay their production increase until worldwide demand grows stronger.
Flynn and other analysts saw the flagging Chinese economy as the major reason for oil slipping. Chinese demand is weakening right now, while Trump’s impact on the world oil markets will not be felt until late next year at the earliest. The already sluggish Chinese economy slipped into the doldrums last week, when Beijing announced its long-awaited economic stimulus plan.
The plan appeared mostly geared tow.
