Oil prices drop post-BoC decision

The WTI fell to a five-day low of $69.82 before edging higher to $70.63 at the ti9me of writing, seeing more than 1.50% losses. PBoC rate cuts fueled energy demand concerns among Oil traders.

World indexes declined following the decision signaling a negative market sentiment. On Tuesday, the West Texas Intermediate (WTI) barrel fell to a five-day low and then stabilized at $70.30 as rate cuts announced by the People’s Bank of China (PBoC) fueled concerns regarding the economic health of the largest Oil importer in the world.

American, German, British and Japanese stocks are falling, indicating a negative market sentiment amid fears of a global economic downturn. During the Asian trading session, the People’s Bank of China made an announcement to lower the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps).

This brought about a decrease in the one-year LPR from 3.65% to 3.55% and the five-year LPR from 4.30% to 4.20%. This decision served as a reminder to investors about the sluggishness observed in Chinese economic activity. In that sense, as Oil prices are positively correlated with strong economic activity, it implied higher demand for black gold, which since China is the largest Oil importer in the world, led Crude Oil prices to weaken.