Adedapo Adesanya
By Adedapo Adesanya
China’s economic issues keep reflecting weakening demand from the world’s top crude importer, and this has further impacted oil prices.
On Tuesday, Brent crude declined by 43 cents or 0.5 per cent to sell at $84.03 a barrel, as the US West Texas Intermediate (WTI) crude slipped by 48 cents to quote at $79.64.
China, the world’s second-largest economy, is considered crucial to shoring up oil demand over the rest of the year.
In its most recent report, the International Energy Agency (IEA) said demand is forecast to average 102.2 million barrels per day this year, with China accounting for more than 70 per cent of growth even as lacklustre macroeconomic conditions, slowing post-pandemic recovery and the burgeoning use of electric vehicles served as threats.
However, China’s sluggish economic activity has frustrated markets as pledged stimulus has fallen short of expectations, including a smaller-than-expected cut in a key lending benchmark on Monday.
Analysts note that weakening demand from the country is not helping boost the market even as Saudi Arabia and Russia cut output to help prop up prices. They noted that the demand trajectory from China that appeared to develop last month may continue for the next couple of weeks.
Additionally, JP Morgan is expecting slowing demand for mobility fuels in China.
On the geopolitical front, Iraq and Turkey discussed the importance of resuming oil flows after finalising pipeline maintenance, a development that could boost global supply.
Recall that Turkey had halted Iraq’s 450,000 barrels per day of exports, about 0.5 per cent of global supply – through the northern Iraq-Turkey pipeline in March after an International Chamber of Commerce arbitration ruling.
The American Petroleum Institute (API) reported a 2.418-million-barrel draw on US crude inventories, compared with the previous week’s 6-million-barrel draw, as oil prices slip on China growth concerns.
The US Energy Information Administration (EIA) will on Wednesday provide the official figure.
Last week, the EIA reported an inventory draw of 6 million barrels for the week to August 11, compared to the previous week’s 5.9-million-barrel build, despite the fact that refiners had boosted run rates and exports were soaring, with US oil output at its highest level since COVID-19.
