In what is turning to be yet another torrid week for the US dollar, oil futures continued their upside spiral in China amid the reported steep draw in the US oil inventories.
China continues her crude imports, despite the prices
After so much anxiety and optimism coupled with the looming OPEC-Saudi-Russia uncertainties, Thursday saw the rise in oil prices in China following the enhance bump in crude oil. Futures continued gaining following the Chinese government’s data that showed that this giant global oil consumer’s crude oil imports peaked, for the first time this year, last month. It is, perhaps the latest sign that the Chinese appetite for imported crude considerably remains ravenous, despite the depressing prices.
While the US crude stocks fell by a saddening 12.1 million barrels a week ago, the latest Chinese exposé that includes an estimated 7.8 million barrels of imported oil a day, speaks volumes. China, for the record, is the planet’s 2nd oil consumer, undeniably, after the US, and with its unquenchable thirst for imported crude, its August’s record peak figures are poised to be usurped. The Chinese imports record that was reportedly broken had been the highest for months and marked a satisfactory 7% increase since over a year ago.
What does these statistics pitting the planet’s most critical consumers of crude mean?
Oil pundits think that the weakened dollar has prompted the high demand for this precious commodity around the globe. It is even thought that the US, besides other developed countries’ fuel consumption figures are dwindling. If that is the case, then China and its markets are destined for better days.
It isn’t much of a shocker that the Chinese oil imports figures have been burgeoning since the onset of 2016 owing to the presence of several independent oil refiners. China has always been a “bully” when it comes to such sensitive corporate matters, as depicted by the imports data and most notably the loosened rules on “teapots.” It is, in fact, the “teapots” factor that has spurred an unprecedented surge in its crude imports, despite the prevailing despicable prices.
The US stockpiles
Meanwhile, the story in the US stockpiles wasn’t any different from last the week’s. A slight rise in oil prices at the New York Mercantile Exchange, a 1.5% rise, on Thursday is seemingly the only motivation to the marketers. The subtle rise is, perhaps attributed to the vast crackdown in crude futures as a result of the temporary consequence of the Atlantic storm.
It is quite strange that over the past two years, Stocks of U.S. crude have always remained high as a result of the impressive output-boosting shale oil boom. However, the past week hasn’t been momentous following the thunderous 12.1 million barrel fall amid the expected 200,000 barrel increase. Unlike China’s fast-rising figures, it seems the theories formulated by oil pundits about what spurred the drops are somewhat correct.
It is the notorious Tropical Storm that threatened the Gulf Coast a week ago that primarily lowered the production. The US government had to stop 11.5% of the Gulf of Mexico because of the storm, a factor that inherently led to the reduced level of oil production.
As the mad dash by the Chinese independent oil importers continued, it is the sellers in the US that seemingly benefited. Beijing is, at the moment, seen to be fighting hard to fortify its strategic oil reserves by taking advantage of the lowered cost of crude oil, a factor that explains the mad rush.
The uncertainty is affecting prices
It is only this past Monday that the news about Russia and Saudi Arabia colluding to stabilize the global oil prices led to the week’s high. But, with the uncertainties about the purported pact looming buoyed by the reported output freeze by the oil producers looking a bit bleak, the prices have since fallen sharply.
Brent oil prices had temporarily rested at the $47.92 a barrel, but the API figures on Wednesday afternoon knocked that up to $48.54 in Europe. It is, mostly, the skepticism, over if the mega producers will agree to follow the formal production cap, which has failed to keep the prices above the $50 a barrel mark.
Peter Lee is an oil and gas analyst at BMI research and alludes the price changes to speculation as there hasn’t ever been a clear-cut sign from the involved that indeed an agreement had been reached.
At the moment and, despite the Chinese effect, oil analysts largely expect the prices to drop further down ahead of the informal Opec meeting in Algeria as the markets are well supplied. Carsten Fritsch who is the senior analyst at Frankfurt’s Commerzbank said that the expected price range is at its peak, and it’s only some time before the drop starts.