In the third quarter, China’s GDP grew 6.5% on a YoY (year-over year) basis—the weakest pace since 2009. A Reuters poll indicated that the growth rate would cool at 6.6%. The ongoing trade war with the US will likely weaken China’s growth rate.
China is the second-largest oil consumer after the US. In 2015, China consumed 13% of the world’s total oil demand. If China’s growth rate squeezes more, it might increase the concerns about oil’s demand growth rate. Amid slowing economic growth, possible measures like currency devaluation that China adopted to counter the economic slowdown could hit the sentiments for growth-driven assets like oil.
US crude oil prices
On October 18, US crude oil December futures fell 1.4% and settled at $68.71 per barrel. The inventory data might have dragged oil prices on the same day. The Energy Select Sector SPDR ETF (XLE) fell 0.5% on October 18. XLE seems to have avoided the magnitude of oil’s fall to a larger extent.
The S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) fell 1.4% and 1.3%, respectively, on October 18. In Part 3 of this series, we’ll analyze US crude oil’s relationship with these equity indexes. Integrated energy stocks like ExxonMobil (XOM) and Chevron (CVX) are also sensitive to oil prices. Market Realist
