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Oil prices fall due to the impact of a possible agreement with Iran and the difficulties facing the Chinese economy

Oil prices fell about 5 percent on expectations that Iranian oil could return to the market and data that showed the Chinese economy is struggling in light of Covid restrictions and a worsening real estate sector.

Brent North Sea fell 5.1 percent to $93.15 a barrel, while West Texas Intermediate fell 5.3 percent to $87.23 a barrel.

With announcements of progress on the Tehran nuclear deal, stock markets tumbled while the dollar traded mixed and investors welcomed a decline in US inflation, though it is still at its highest level in decades.

Oil prices, which were mostly low on the back of China’s economic data, fell further and recorded a daily decline of more than 5%.

“It was a disappointing start to the week in financial markets as investor optimism collided with the reality of China’s economic data,” said Craig Erlam, market analyst at OANDA.

China’s central bank unexpectedly cut key interest rates on Monday as a series of data showed a slowdown in the world’s second-largest economy.

The data showed that the growth of industrial production and retail sales in China in July was less than expected.

Industrial production rose 3.8% year on year but fell from 3.9% recorded in June, much less than analysts had expected.

Beijing’s commitment to a “zero Covid infection” strategy is slowing the economic recovery as sudden closures and lengthy lockdowns hit business activity and a recovery in consumption.

Iranian Foreign Minister Hossein Amir Abdollahian said his country would submit its “final proposals” to revive the 2015 nuclear deal by midnight Monday after Washington agreed to two proposals for Tehran.

The agreement means that Iran’s 2.5 million barrels per day of oil will no longer be subject to international sanctions, helping ease supply pressures that have driven prices up.

Major stock markets in Europe closed slightly higher, while Wall Street shares fell in morning trading.

Markets are awaiting the release of the minutes of the Federal Reserve’s latest fiscal policy meeting in July, Wednesday, for information on the US Central Bank’s interest rate plans.

Source: AFP

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