Oil markets are betting that key China indicators due this week will likely confirm a slowdown in the world's second-largest economy, despite recent official data showing surprise growth in factory activity.
Beijing releases trade figures for July on Thursday, while wholesale and consumer inflation, fixed asset investment, industrial output and retail sales data for the month are due on Friday. Softer headline numbers may suggest reduced demand for primary inputs and will be negative for risk assets.
This week's "figures can suggest a range of possibilities but I believe a slowdown is in place which will bring oil lower," said Jay Richards, Investment Manager at GTL Capital Management in Sydney.
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Though the results of CNBC's weekly sentiment survey do reinforce that view (fifteen of the 26 respondents, or 58 percent, believe prices will decline this week) just under a third (eight out of 26 of those polled) are bullish, implying a non-negligible risk that the China data may reveal a positive surprise, possibly wrong-footing the market bears.
Over the weekend, China delivered upbeat growth figures for its services sector, which came on the heels of official factory activity numbers released last Thursday which showed an unexpected expansion in July. Both economic reports have raised optimism that this week's data will be equally resilient.
"China will do whatever is within its power to stabilize and halt the slowdown in their growth," said Sean Hyman, Editor of Moneynews at Ultimate Wealth Report. "We'll see their GDP growth rate remain in the 6.5 percent to 7.5 percent range. I don't think it's going to slump as much as people think. It's already 'a known' that China is slowing. The worst is likely behind them."