Oil slides on China trade slump, but crude imports remain high

OPEC and some non-OPEC allies have been cutting supply since late 2018, providing oil prices with some support. (Reuters)
Updated 14 January 2019
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Oil slides on China trade slump, but crude imports remain high

  • China’s December overall exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years
  • In the US, drillers cut four oil rigs in the week to January 11

SINGAPORE: Oil prices fell by almost 1 percent on Monday, with Brent crude slipping below $60 per barrel, after Chinese data showed weakening imports and exports in the world’s biggest trading nation and second-largest crude oil consumer.
International Brent crude oil futures were at $59.91 per barrel at 0403 GMT, down 57 cents, or 0.9 percent from their last close.
US West Texas Intermediate (WTI) crude futures were down 47 cents, or 0.9 percent, at $51.12 a barrel.
China’s December overall exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, official data showed on Monday, pointing to further weakening in the world’s second-largest economy. Imports last month also contracted, falling 7.6 percent, the biggest decline since July 2016.
“Crude futures were back in the red as trading began for a fresh week in Asia, in tandem with most of the region’s stock markets ... (as) China early Monday reported $351.76 billion trade surplus in dollar terms for 2018, the lowest since 2013,” said energy consultant Vandana Hari of Vanda Insights in a note on Monday.
The weak trade figures confirm a raft of indicators that have been pointing to an economic slowdown since the second half of 2018.
“Producer price inflation has decelerated for six consecutive months, adding to other signs of cooling industrial activity (in China) amid weakening global demand,” rating agency Moody’s said in a note.
Traders said the data pulled down crude oil futures and Asian stock markets alike, which had both posted modest gains earlier on Monday.
Economic research firm TS Lombard said oil prices were capped as “the world economy is now slowing ... limiting the scope for positive surprises in oil demand and hampering inventory reduction.”
Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said “the deterioration seen recently in forward-looking economic data from the US to Europe and China” meant that the upside for crude oil futures was likely limited to $64 per barrel for Brent and for $55 for WTI.
Despite the weak Chinese trade data, the country’s oil imports remained sky-high in December at 10.31 million barrels per day (bpd), holding above the 10 million bpd mark for the second month in a row, on stockbuilding by small independent refiners who were trying to use up annual quotas.
Amid this strong demand from the world’s biggest oil importer, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, have been cutting supply since late 2018, providing crude prices with some support.
In the United States, drillers cut four oil rigs in the week to Jan. 11, bringing the total count down to 873 energy services firm Baker Hughes said in a weekly report on Friday.


US-China trade deal hopes grow as oil prices decline

Updated 19 June 2019
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US-China trade deal hopes grow as oil prices decline

  • Data suggested a smaller-than-expected fall in American crude inventories
  • Preparations underway for Donald Trump to meet Xi Jinping next week at the G20 summit in Osaka

LONDON: Oil prices declined on Wednesday as data suggested a smaller-than-expected fall in American crude inventories, as hopes for a US-China trade deal continue to grow.
Brent crude futures were down 51 cents at $61.72 a barrel.
US West Texas Intermediate crude fell 25 cents to $53.65 a barrel. On Tuesday, it had recorded its biggest daily rise since early January.
After weeks of swelling, US crude stocks fell by 812,000 barrels last week to 482 million, the American Petroleum Institute said on Tuesday, a smaller fall than the 1.1-million-barrel drop analysts had expected.
Official estimates on US crude stockpiles from the US government’s Energy Information Administration are due during afternoon trading.
US President Donald Trump offered some support, saying preparations were underway for him to meet Chinese President Xi Jinping next week at the G20 summit in Osaka, Japan, amid hopes a trade deal could be thrashed out between the two powers. Trump has repeatedly threatened China with tariffs since winning office in 2016.
European Central Bank President Mario Draghi also offered a boost, saying on Tuesday that he would ease policy again if inflation failed to accelerate.
Tensions remain high in the Middle East after last week’s tanker attacks. Fears of a confrontation between Iran and the US have mounted, with Washington blaming Tehran, which has denied any role.
Trump said he was prepared to take military action to stop Iran having a nuclear bomb but left open whether he would approve the use of force to protect Gulf oil supplies.
On Wednesday, oil markets shrugged off a rocket attack on a site in southern Iraq used by foreign oil companies.
“It is interesting to note that the crude oil futures market could not rally on hawks planting bombs in the Strait of Hormuz but could rally on doves planting quantitative easing,” Petromatrix’s Olivier Jakob said in a note.
“This is an oil market that doesn’t know how to react when an oil tanker blows up but knows how to react when the head of a central bank makes some noise.”
Members of the Organization of the Petroleum Exporting Countries have agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.