Oil prices are finally falling? Global oil prices on Tuesday evening are already down 2 percent or more, as markets react to a decline in China’s business activity index (PMI), according to trading data and expert commentary.

The price of March futures on Brent crude oil fell by 2.13%, to $84.08 per barrel, while February futures on WTIfell by 2.5%, to $78.25.

Falling oil prices effect on economy

What is the effect of falling oil prices on the economy? At the end of last year, Brent gained 8.8% and WTI rose 5.5%. But in just the fourth quarter, oil fell in price by 3.3% and 4%, respectively. And the risks of a recession in the global economy continue to undermine expectations of strong demand for raw materials. The world’s central banks tend to raise refinancing rates to fight inflation, reinforcing such fears.

Also, a major oil importer, China, has seen a rise in the incidence of covid, which also supports uncertainty about the economic outlook. This past Saturday it was reported that the country’s non-manufacturing PMI fell to 41.6 points in December from 46.7 in November. A PMI value above 50 points indicates an increase in economic activity, while a lower value indicates a decline.

“The sharp drop in the official services PMI indicates a decline in oil demand, but we suspect the blow to industrial activity … was more modest,” Market Watch quoted Capital Economics analyst Caroline Bain as saying.

Earlier we reported that natural gas prices in Europe dropped below $800 per thousand cubic meters.