Oil prices fall due to negative data from China, which raises concerns about demand.

Oil prices fall due to negative data from China, which raises concerns about demand.

Oil Prices Ease as Concerns over Slow Demand from China Grow

TOKYO, Aug 9 (ANBLE) – Oil prices eased in early trade on Wednesday as concerns over slow demand from top crude importer China grew after bearish trade data, outweighing fears over tighter global supply arising from production cuts by Saudi Arabia and Russia.

oil prices

Both Brent crude futures and U.S. West Texas Intermediate (WTI) crude experienced a slight decline. Brent crude futures fell 17 cents, or 0.2%, to $86.00 a barrel by 0039 GMT, while WTI crude was at $82.73 a barrel, down 19 cents, or 0.2%. Despite the minor decrease, both contracts gained nearly $1 on the previous day.

Factors Affecting Oil Prices

According to Chiyoki Chen, chief analyst at Sunward Trading, oil prices are struggling to further rise due to lingering concerns over a sluggish recovery in China’s economy and fuel demand. In addition, worries over slowing demand in the United States and Europe arise from a series of interest rate hikes, which limit the upside potential for oil markets. Chen predicts that WTI would trade in the range of $75 to $85 a barrel later this month, taking into account these factors.

Impact of China’s Crude Oil Imports

China’s crude oil imports in July fell 18.8% from the previous month to the lowest daily rate since January, according to customs data. This decline was driven by major exporters cutting back overseas shipments and domestic stocks continuing to build. The overall imports contracted by 12.4% in July, far steeper than the expected 5% drop, while exports fell by 14.5%, compared with a fall of 12.5% predicted. These figures point towards a significant reduction in demand from China, which contributes to the concerns about slow demand growth and its impact on oil prices.

Production Forecasts and OPEC+ Cuts

The U.S. Energy Information Administration’s (EIA) monthly report projected that U.S. crude oil production is expected to rise by 850,000 barrels per day (bpd) to a record 12.76 million bpd in 2023. This forecast indicates that the U.S. could overtake the previous peak of 12.3 million bpd in 2019.

The recent rise in crude prices can be attributed to extended cuts to Saudi Arabia’s production as well as increasing global demand. The world’s top exporter, Saudi Arabia, extended its voluntary production cut of 1 million bpd to the end of September, with the possibility of further extensions or deeper cuts. This move aims to balance global supply and support oil prices. Russia also announced a reduction of 300,000 bpd in oil exports for September, further contributing to the efforts of stabilizing the market.

Stockpiles and Market Outlook

While U.S. crude oil stocks rose last week, gasoline and distillate stockpiles dropped, as reported by the American Petroleum Institute. The U.S. government data on stockpiles is expected to be released later on Wednesday.

Overall, despite the slight decline in oil prices, the market is still influenced by various factors such as China’s demand, global supply cuts, and production forecasts. The future trajectory of oil prices will depend on how these factors evolve and the global economic recovery progresses.