Oil prices slide as China weighs down demand hopes
Oil prices have tumbled to two-and-a half month lows in this morning’s session, with underwhelming data from China weighing down both major benchmarks.
Brent Crude has slipped 1.88 per cent to $83.58 per barrel, while WTI Crude is also down 1.79 per cent to $79.37 per barrel in early trading — hitting their lowest levels since August.
This follows a mixed bag of economic data from China — with crude oil imports revealing robust month-on-month growth, but exports contracting more sharply than expected.
Exports shrank by 6.4 per cent year on year in October, while the country’s trade surplus narrowed to its weakest level in 17 months.
Meanwhile, escalating fears of supply shortages caused by conflict between Israel and Hamas have softened, with markets initially spooked over potential disruption and sanctions if the war triggered the involvement of countries such as Iran and Lebanon.
Nevertheless, prices remain propped up by swingeing supply cuts from the OPEC and its allies including Russia — known as OPEC+ — with the world’s most influential cartel slashing production by five million barrels a day until the end of the year.
Fiona Cincotta, senior financial market analyst at City Index, said: “The data signals the continued decline in the Chinese economic outlook driven by deteriorating demand in the country’s largest export destination — the West. Meanwhile, on the supply side, Saudi Arabia and Russia reiterated their commitment to voluntary production cuts over the weekend.
She argued that weak global demand, meant OPEC+ “is unlikely to be in a rush to reverse oil production cuts when it meets at the end of this month”.
The cartel’s joint monitoring committee is set for its next meeting on 26 November in Vienna, Austria.
Carsten Fritsch, commodity analyst at Commerzbank, also believed Saudi Arabia would find it difficult to withdraw its production cuts at the end of this year — as an expansion in oil production would risk generating an oversupply in the first half of next year.
He said: “Russia is even likely to reduce its oil exports by even somewhat more than planned in November, as the country’s energy ministry announced last Friday.
“That said, this could also be merely to offset the increase in exports in October. As data from Bloomberg suggest, seaborne crude oil exports in October were only slightly below the average figure in the months of May to June, which serves as the reference level for the export cuts.