MW: Oil prices dip as Chinese data, IEA warning weigh
Crude-oil prices edged lower Tuesday, extending the prior day’s sharp drop as early gains evaporated.
A warning from the International Energy Agency helped put fresh pressure on oil as the watchdog said the market likely would remain oversupplied next year.
Crude’s early advance had been mainly driven by bargain hunting, analysts said, noting that the tepid rise in China’s oil imports last month was uninspiring.
Crude futures for delivery in November CLX5, +0.38% recently traded at $47.07 a barrel, down 3 cents or 0.1%. Meanwhile, November Brent crude LCOX5, +0.22% clung to a gain, rising 10 cents, or 0.2%, to $50.35 a barrel.
On Monday, oil prices tumbled, falling around 5% after the Organization of Petroleum Exporting Countries reported its September output climbed to a more-than-three-year high at an average of 31.57 million barrels a day, up about 109,000 barrels a day from the previous month and higher than the group’s target of 30 million barrels a day.
In its closely watched monthly oil market report, the IEA cut its forecast for oil demand growth for next year by about 200,000 barrels a day compared with its previous assessment in September, a Wall Street Journal report said. “A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels-–should international sanctions be eased--are likely to keep the market oversupplied through 2016,” the agency said.
Lingering oversupply coupled with slowing global demand, in particular from China, the world’s largest crude importer, have slashed prices by nearly half since last summer. Traders often watch China’s trade data closely to assess future demand.
China’s September exports fell 3.7% year-over-year in dollar terms, an improvement from a 6.1% fall in August and a 6.5% drop expected by the market, while imports fell 20.4% in dollar terms, falling short of a 16% fall expected by the street, deepening worries that the world’s second-largest economy is spattering. That’s according to China’s General Administration of Customs.
China’s September crude-oil imports rose 1.4% year-over-year to 27.95 million tons, rising 8.8% year-over-year to 248.62 million tons in the first nine months of the year.
“The rise in crude imports isn’t too impressive considering the broader prolonged imports decline,” said Virendra Chauhan, an oil analyst at Energy Aspect, adding that most of the Chinese buying of crude oil in recent months was likely to leverage the current price slump to build up reserves.
The September data was also likely boosted by delayed shipments, as the deadly blast at the Tianjin port in August resulted in cargoes being sent back to Singapore, he said.
Daniel Ang, an energy analyst at Phillip Futures, had said bullish momentum on Tuesday was likely to be short-lived given heightened uncertainty such as the continuing violence in Syria and expanding oil production in the Middle East.
Tuesday’s early rise was “purely bargain-hunting,” and the market is “keeping an eye on the weekly U.S. inventory and production data for cues,” he said.
The U.S. Energy Information Administration is expected to release its weekly analysis on Thursday.
