Oil Prices Dip as China’s Demand Slumps by 12%

Oil Prices Dip as China’s Demand Slumps by 12%

Oil prices dipped in the global commodity market on Thursday after data showed the aggregate crude demand in China fell by about 12%. Oil market have been swinging both ways struggling to find balance amidst geopolitical tensions.

The market expected upside in prices on account of more than expected decline in U.S Inventories. This is expected to boost demand from the American while weak job record remains a downside.

However, the supply side remained tight after OPEC+ group announced decision to maintain status quo on output while Libya’s largest oil field halted production could add pressure on energy economy.

The latest trade data from China was relatively bearish to the global commodities market. Chinese crude oil imports in July averaged 10.01 million barrel per day, down by 3.1% year of year and 11.8% lower month on month, said ING commodities strategists Warren Patterson and Ewa Manthey in a note.

This leaves cumulative imports over the first seven months of the year down 2.4% year on year. Weaker Chinese oil demand was a key driver behind the weakness in oil prices over much of July, ING said in the note.

ICE Brent crude fell by 0.2% to $78.16 per barrel, West Texas Intermediate (WTI) traded at $75.16 per barrel at the same time, a 0.1% fall from the previous session that closed at $75.23 per barrel.

Demand fears fuelled by the heightened recession concerns in the US, the world’s largest oil consumer, supported downward price movements.

On the other hand, data indicating a drop in crude stocks in the US, limited downward price movements by suggesting that oil demand was increasing.

According to data released by the Energy Information Administration (EIA) late Wednesday, US commercial crude oil inventories declined by about 3.7 million barrels to 429.3 million barrels, compared to the market prediction of a fall of around 1.6 million barrels during the week ending Aug. 2.

Meanwhile, ongoing uncertainties regarding when the US Federal Reserve’s (Fed) will lower interest rates continue to influence prices by fueling demand concerns.

Moreover, conflicts in the Red Sea, which is critical for global maritime trade, continue to influence upward price movements by raising supply concerns.

The US Central Command said in a statement on Wednesday that it destroyed two Iranian-backed Houthi uncrewed aerial vehicles, one Houthi ground control station, and three Houthi anti-ship cruise missiles in Houthi-controlled areas of Yemen in the past 24 hours.

The weapons presented a ‘clear and imminent threat’ to US and coalition forces and merchant vessels in the region, the US command said.

Yesterday, oil prices also rallied. ICE Brent settled 2.42% higher on the day after US commercial crude oil inventories fell by 3.73 million barrels- more than the market was expecting. It is also the sixth consecutive week of crude oil stock declines.

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