Oil Drops Over 1% Amid China’s Real Estate Crisis

On Monday, January 29, oil prices dropped significantly despite the U.S. preparing to respond to a deadly attack on its military in the Middle East. Investors shifted their focus more towards China's economic troubles rather than geopolitical tensions.

By the end of the trading session on January 29, Brent crude fell by $1.15 (1.38%) to $82.40 per barrel, while WTI crude dropped by $1.23 (1.58%) to $76.78 per barrel. This decline followed a strong increase in oil prices the previous week.

A Hong Kong court ordered the liquidation of China Evergrande, the world's most indebted real estate developer. This crisis in China’s real estate sector is pressuring the country’s economy and raising concerns about a potential decrease in Beijing's crude oil demand.

Although oil prices initially rose by more than 1% after a missile attack by Iran-backed militants killed U.S. troops in Jordan over the weekend, concerns about China’s economy and North American oil production have overshadowed geopolitical tensions.

According to the White House, the U.S. vowed to retaliate against the attack that resulted in the deaths of three American soldiers and injuries to others from a drone strike targeting troops stationed in northeastern Jordan near the Syrian border on January 28.

These casualties mark the first American deaths due to enemy attacks since the conflict between Israel and Hamas began on October 7, 2023.

Iran’s Foreign Ministry denied any involvement, stating that the militants acted independently of Tehran.

While oil prices have mostly remained relatively stable despite the Middle Eastern conflict so far, Helima Croft from RBC Capital Markets suggested that this could change if the U.S.-Iran confrontation disrupts the Strait of Hormuz, a critical chokepoint for global oil supply.

Source: Vietstock