Oil Prices Become Volatile as China’s Imports Drop

Oil Prices Become Volatile as China’s Imports Drop

Oil prices become volatile Wednesday after the initial rally as China’s imports drop. Concerns about demand outlook mount as data indicates that China reported 3% drop in crude imports in the country in the first half of the year.

International benchmark Brent crude was trading at $76.44 per barrel after a 0.07% loss from $76.49 a barrel on Tuesday.

Also, American benchmark West Texas Intermediate (WTI) was trading at $75.18 a barrel at the same time with a 0.09% decrease after ending the previous session at $75.25 per barrel.

China’s crude imports fell 3% year on year from January to June, showing the first dip since 2013. The negative data implied a demand decline in China, the world’s largest oil importer, exerting downward price pressure.

However, the International Energy Agency (IEA) said in its monthly oil report on Tuesday that global oil demand is forecast to increase 3.1% next year to an average of 99.5 million barrels per day (bpd) on the back of more economic activity and expectations that the expansion of vaccination campaigns will prevent a resurgence of Covid-19 cases.

The data from the American Petroleum Institute (API) also supported the IEA’s expectations.

According to the predictions of the API, US crude oil stockpiles are estimated to drop by 4.08 million barrels, compared to the market expectation of a fall of 4.3 million barrels.

A significant drop in inventories indicates an increase in crude demand in the US, assuaging market concerns about dwindling demand.

Official oil stock data from the US Energy Information Administration (EIA) will be released later on Wednesday.

Meanwhile, the United Arab Emirates, UAE, energy ministry said in a statement that no deal with OPEC+ on its baseline has been reached and deliberations were continuing.

Disagreement between OPEC’s defacto leader Saudi Arabia and the UAE led to a collapse in talks last week on boosting production to cool oil prices.

Oil prices were earlier under pressure after data showed China’s crude imports dropped by 3% from January to June compared with a year earlier, the first such contraction since 2013, as import quota shortages, refinery maintenance and rising global prices curbed buying.

“Imports were scaled back as surging prices for crude oil have eroded refinery profit margins,” Eurasia Group said in a note.

Lending support to the market, U.S. stockpiles of oil and gasoline inventories fell last week, according to two market sources on Tuesday, citing American Petroleum Institute figures.

Also, IEA said global withdrawals from storage in the third quarter were set to be the most in at least a decade, pointing to early June stock draws in the United States, Europe and Japan.

Oil Prices Become Volatile as China’s Imports Drop