For the first time in about a month and a half, oil prices have fallen almost consistently this week. In particular, weak economic results from the Chinese economy make oil less valuable. In addition to disappointing trade figures and deflation, the Chinese real estate market is still far from healthy.
For the first time since the end of June, the oil price fell almost constantly. On Friday, August 11, the price of Brent oil was at its highest point of the week: $86,81 per barrel. After that, the oil price fell by almost 4%. On Wednesday, August 16, oil traded at $83,45 per barrel.
The oil market reacted with a slight delay to weak economic data from China. On Tuesday, August 8, it emerged that both imports and exports of the Asian country declined much more than analysts had expected. Imports fell by as much as 12,4% in July compared to 2022. This is remarkable, as China was still completely locked down due to corona at that time and it was also much larger than analysts had anticipated. In a major Reuters survey, economists had expected a decline of 5%.
Imports of goods have not decreased so sharply since the corona crisis. Compared to July 2021, exports fell by 14,5%, against market expectations of 12,5%. The weaker trade in the world's largest economy is seen by analysts as a sign that the global economy is not exactly picking up speed. Analysts therefore expect the global economy to weaken again in the third quarter.
A day later (Tuesday, August 9), the long-held suspicion that China is suffering from deflation was confirmed. On average, consumer prices fell by 0,3% compared to July last year, according to figures from China's national statistics bureau. There are fears that consumers will postpone major spending, further weakening China's internal economy. Comparisons are increasingly being made with the great Japanese rise in the XNUMXs, which was followed by deflation and weak economic growth.
Chinese real estate market
One of the biggest underlying problems remains the weak Chinese real estate market. Traditionally, the real estate market is one of the biggest drivers of economic growth. This market makes up 25% of the Chinese economy. Since the impending bankruptcy of China's largest real estate investor Evergrande in 2021, the Chinese real estate market has been in dire straits. Although the real estate market has calmed down somewhat since then, it is still far from healthy. Major Chinese real estate company Country Garden was unable to repay $22,5 million in bonds. This confirms a long-standing fear that China's largest private real estate company is unable to repay its debts.
The company has invested heavily in smaller Chinese cities. In retrospect, this strategy turns out to be very risky. Until two years ago, real estate in these cities was often purchased solely as investment property. In practice, entire neighborhoods in these cities remain uninhabited, which means that the value of the home turned out to be far too high. The collapse of Country Garden could have enormous consequences. At the end of 2022, the real estate group had more than $194 billion in debt on its balance sheet.
After the strong increase in recent weeks, the diesel price has fallen again. On Thursday, August 10, the price of diesel was at its lowest point of last week. On that day, the diesel price was €138,80 per 100 liters. On Wednesday, August 16, the price had fallen to €134,61.