Oil Price Dips on Weak Chinese Data

Oil prices fell Monday on the back of weak Chinese trade data, which provided a fresh signal the world’s second-largest economy is slowing.

— Brent crude, the global oil benchmark, was trading down 1.9% at $59.32 a barrel on London’s Intercontinental Exchange.

— West Texas Intermediate futures, the U.S. oil standard were down 2.2% at $50.79 a barrel on the New York Mercantile Exchange.

HIGHIGHTS

China: An unexpected decline in Chinese imports and exports in December weighed on equities and commodities Monday, as investors feared a further slowdown in the Chinese economy that could hinder global growth. “December saw Chinese trading activity decrease significantly as a result of the trade dispute with the U.S. Contrary to expectations, both imports and exports declined year-on-year,” analysts at Commerzbank wrote in a note Monday.

However, “past the headline numbers, it is worth noting that imports of crude oil by China are running high according to customs data with a second month in December above the 10 million barrels-a-day mark,” said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas. China in 2017 surpassed the U.S. as the world’s largest importer of crude oil.

Price Rebound: Crude prices on Friday closed down nearly 2%, as a retreat in U.S. stock markets reduced risk appetite and spurred a bout of profit-taking. But the decline followed nine straight sessions of gains that have seen both leading benchmarks jump more than 20% since reaching annual lows at the end of December. The oil market has been bolstered by fruitful negotiations between the U.S. and China over their continuing trade dispute, as well as production cuts from the Organization of the Petroleum Exporting Countries and its allies.

INSIGHT

OPEC+: OPEC and its allies outside the cartel began at the start of January to implement a collective crude production cut of 1.2 million barrels a day. The move, which was agreed at the start of December, is meant to rebalance an oversupplied market and boost prices. Both crude benchmarks plummeted by roughly 40% in the fourth quarter of last year. At the time, Saudi Arabia, the world’s largest exporter of crude, has indicated it would further curb its crude exports.

“Saudi Energy Minister Khalid al-Falih reaffirmed over the weekend that he believes that OPEC+ has taken enough action to balance the oil market this year,” said Warren Patterson, commodities analyst at ING Bank.

AHEAD

— The American Petroleum Institute, an industry group, releases weekly data on U.S. oil inventories, followed by official government data from the Energy Information Administration on Wednesday.

— OPEC on Thursday releases its monthly oil market report, followed by that of the International Energy Agency on Friday.
Source: Dow Jones