Investing.com-- Oil prices fell sharply in early Asian trade on Monday, retreating after data from top importer China pointed to a sustained deflationary trend, while the country’s plans for fiscal stimulus largely underwhelmed.
Crude prices were also hit by chatter over a potential ceasefire in the Middle East, after Lebanese Prime Minister Najib Mikati called for an immediate ceasefire between Israel and Hezbollah. Concerns over an escalation in the conflict saw oil prices clock two weeks of strong gains.
Brent oil futures expiring in December fell 1.8% to $77.65 a barrel, while West Texas Intermediate crude futures fell 1.8% to $73.54 a barrel by 19:48 ET (23:48 GMT).
A monthly report from the Organization of Petroleum Exporting Countries is due later in the day and is likely to provide more cues on supply.
China disinflation persists, fiscal stimulus underwhelms
Chinese data released over the weekend showed consumer inflation unexpectedly eased in September, while producer inflation marked nearly two years of contraction.
The reading pointed to a sustained deflationary trend in the world’s biggest oil importer, which bodes poorly for demand.
Middling signals on plans for more stimulus also battered sentiment. China’s finance ministry said over the weekend that it planned to unlock more fiscal stimulus, but provided scant cues on the timing or scale of the measures.
This largely underwhelmed markets, given that traders were already impatient with Beijing’s languid approach to doling out more economic support.
China had in late-September announced a slew of monetary stimulus measures to support the economy. But enthusiasm over these measures also wore thin.
China has been a main point of contention for oil markets, as the world’s biggest oil importer struggles with sustained deflation and softening economic growth.
Middle East conflict remains in focus
The Middle East conflict remained squarely in focus for oil markets, as aggression between Israel and Hezbollah showed little signs of easing.
The Israel-Hamas war marked a one-year anniversary earlier in October, with attempts at brokering a ceasefire showing little progress.
Fears of an escalation in the conflict, especially if Israel attacks Iran’s oil facilities, were a key boost to crude prices in recent weeks, as traders attached a greater risk premium to oil.