SEATTLE (Oil Monster): Oil prices fell about 2% to a two-week low on Monday as news of surging interest in Chinese startup DeepSeek's low-cost artificial intelligence (AI) model prompted concerns over energy demand to power data centers.
Before the news of DeepSeek broke, oil was already trading lower on weak economic data from China and worries that U.S. President Donald Trump's proposed tariffs could further pressure economic growth and energy demand.
Brent futures fell $1.42, or 1.8%, to settle at $77.08 a barrel, while U.S. West Texas Intermediate (WTI) crude ended $1.49, or 2.0%, lower at $73.17.
Brent closed at its lowest since Jan. 9 and WTI at its lowest since Jan. 2.
Chinese startup DeepSeek's AI Assistant overtook U.S. rival ChatGPT to become the top-rated free application available on Apple's App Store in the U.S. That fed doubts among investors who have poured money into U.S. energy firms hoping AI would drive demand for energy to power data centers.
"The DeepSeek model is (reported to be) more energy and capital efficient, which calls into question the significant electric demand projections for the U.S.," analysts at Jefferies, an investment bank, said in a report, noting AI represents about 75% of overall U.S. demand forecasts through 2030-2035 in most projections.
"It is still early to draw conclusions on the outlook in the immediate aftermath of DeepSeek, but the 20%(-plus) YTD (year-to-date) rally in power companies looks exposed," Jefferies said.
In other news from China, the world's second biggest economy behind the U.S., manufacturing data was weaker than expected, adding fresh concerns over energy demand.
"The weak readings highlight the need for more policy efforts to stabilize economic growth," analysts at Citibank said in a report.
Courtesy: www.reuters.com