Oil prices dip as investors await OPEC+ meeting

Yahoo Finance's Akiko Fujita and Brian Cheung discuss slowing Chinese growth and the latest moves in the energy market.

Video transcript

AKIKO FUJITA: Let's take a look at where WTI and Brent crude are trading right now. Down-- it was down as much as 5% earlier. And we're seeing WTI down about 4% there. Part of this, Brian, is the demand story, right. We got data out on factory activity coming out of China showing to slower growth. No real surprise on that front. A bit of a mixed picture, you could argue, in terms of how significant that decline is.

We did get a survey out today for private businesses, deteriorating sentiment there as well. It wasn't as bad as expected, but we're still talking about a contraction in terms of factory activity in July. All of this, of course, goes back to that zero-COVID policy, but we're seeing oil pull back in a big way, obviously because the second-largest economy.

And there are concerns about whether that demand can continue. This kind of goes back to some analysts that we've had on who've said that, look, this isn't all about supply. Despite what we've been hearing about the pullback because of Russia-Ukraine-- or largely driven by Russia-Ukraine, there is still question marks around what that demand looks like going into year-end.

BRIAN CHEUNG: And consumption in the world's second-largest economy is going to be very substantial, part of that and all of that onlining that happened once the Chinese economy reopened after the COVID-related shutdowns at the top of the year were a big story behind that. But look, at the end of the day, what's happening in China is very relevant to what's going to be happening here in the United States when you talk about that overall inflationary story because the fact that oil prices that really ripped higher at the beginning of this year were such a large component into the bleed-through through all the other types of inflation-related categories, well, it's been down, what?

I mean, it was at $117 a barrel, Brent crude oil, early in the year. When you see a $95 handle on that, you're saying that's something that's probably going to bleed into the other inflationary reports as well in the future. Too early to call the top, but certainly at least one green shoot.

AKIKO FUJITA: And you have to wonder what the calculation will be going into that OPEC Plus meeting come Wednesday.

BRIAN CHEUNG: Right.

AKIKO FUJITA: We've, of course, heard the Biden administration say, look, we sort of got assurances, maybe a little strong of a word, but we did get sort of a nudge from the Saudis to say, we are going to potentially change the output. I don't know what the expectation is on that front, broadly. But I mean, that's got to be something that they're looking at too, right, at a time when we're seeing prices come down.

BRIAN CHEUNG: Yeah. And for what it's worth, the past few OPEC meetings have kind of been thematic to increasing the supply. The world has acknowledged that higher issues-- higher prices as a result of the issue in Russia. Russia's invasion of Ukraine have largely contributed to inflation around the world. But this July meeting, you do kind of wonder about August. I almost forget what--

AKIKO FUJITA: We're in August.

BRIAN CHEUNG: We're in August already. But that August meeting for OPEC, you do wonder if that story is going to start to change a little bit, not that they're going to pull back on the supply, but might they not be as aggressive in pumping out the amount of oils in the coming month.

AKIKO FUJITA: Well I guess the--

BRIAN CHEUNG: We'll have to see.

AKIKO FUJITA: --question is whether they have the capacity to make a meaningful dent.

BRIAN CHEUNG: Exactly.