Oil falls from a two-and-a-half-week high after negative data from major consumers.

Oil prices fell during trading on Monday from their highest levels in more than two and a half weeks, amid increasing investor concerns that weak demand from major crude oil consumers could lead to a production surplus. Today's negative data cast a shadow over investor sentiment in the oil market.

Current Oil Prices

In terms of trading, January futures for Brent crude fell by 0.70% to reach $73.95 per barrel, while February futures for West Texas Intermediate (WTI) dropped deeper, by 1.46%, to record $70.26 per barrel.

What Caused Oil Prices to Decline Today?

Data released this morning showed growth in Chinese retail sales that was much lower than expected, subsequently confirmed by the National Bureau of Statistics of the People's Republic, indicating that domestic demand in the country is still insufficient. This reflects the ongoing struggle of the world's largest crude oil-importing economy to recover despite the relatively large scale of economic stimulus measures announced by the Chinese government recently, leading to a significant drop in oil prices during Asian trading hours.

Moreover, data released during European market hours revealed weaker-than-expected performance in the manufacturing sector in Britain and the Eurozone, amidst the continued tightening monetary policy of the European Central Bank and the Bank of England, which is putting pressure on domestic consumption and private sector activity, especially in the Eurozone, which, as an economic bloc, is the largest importer of crude oil in the world. These data also added more pressure on oil prices.

Additionally, data from the U.S. Federal Reserve Bank of New York indicated that the state’s manufacturing index recorded marginal growth much lower than what markets had expected for December, increasing investor fears of another slowdown in demand for oil from the world's largest crude consumer.

This decline in oil prices comes as investors prepare for a potential broad cut in interest rates by the U.S. Federal Reserve during the Federal Open Market Committee meeting on Tuesday and Wednesday.