On Monday, the price of WTI and Brent crude dropped by more than 5% as China’s central bank lowered lending rates to boost demand after July economic statistics turned negative due to China’s stringent zero-COVID policy. The property crisis in China, which caused property investments to decline by 12.3% in July, the fastest rate this year, further lowered the country’s July GDP data.

The market was caught off guard by both the discouraging economic statistics and the central bank’s rate reduction. Chinese officials now anticipate that the world’s second-biggest consumer of crude oil and the world’s largest importer of crude oil will fall short of the 5–5.5% target rate for second-half economic growth.

WTI fell $4.87 (-5.29%) to $87.22 a barrel because of the unexpected July report. Brent crude decreased to $93.23 a barrel on the day, losing $4.92 (-5.01%).

As a result, refinery output in China fell to 12.53 million bpd, the lowest level since March 2020 and 8.8% below the processing rates in July 2021 due to unexpected shutdowns at state-run refineries like Sinopec and PetroChina and declining refining margins. Another factor that could cause refinery slowdowns is a fresh round of tax investigations the Chinese government is ready to start against private teapot refiners. One-fifth of China’s imports of crude oil are teapots.

The majority of the oil used by China is imported from Saudi Arabia, Russia, Iraq, and Oman.

Oil prices on Monday were also influenced by the Iranian situation, as Iran said it would be able to reach a nuclear agreement “in the near future” provided the United States would take into account its “red lines”. A signed nuclear agreement might increase the supply of oil barrels on the market.