China's Crude Stockpiling Surges Amid Weaker Refinery Output and Demand

Petroleum Price

• Oil prices edged up in early trade on Monday, driven by expectations of a U.S. interest rate cut this week. However, gains were capped by weaker data from China and persistent demand concerns.
• Brent crude futures for November rose 3 cents to $71.64 a barrel at 0402 GMT, while U.S. crude futures for October increased by 16 cents, or 0.2%, to $68.81 a barrel.
• Both contracts had settled lower in the previous session, as concerns over supply disruptions eased with the resumption of Gulf of Mexico crude production after Hurricane Francine.
• Additionally, U.S. rig count data showed a weekly rise, further easing supply concerns.
  MCX crude oil prices opened at ₹5,774, up by 0.07%.

Petroleum Demand and Supply

• In China, the largest oil importer, industrial output growth slowed to a five-month low in August, while retail sales and new home prices weakened further. Oil refinery output also declined for the fifth consecutive month, as disappointing fuel demand and weak export margins curtailed production.
• China boosted crude oil inventories in August by the largest amount in 14 months, confirming that the increase in imports was driven by stockpiling rather than a recovery in fuel consumption.
• based on official data estimates, 1.85 million barrels per day (BPD) were added to either commercial or strategic storages.
• This was the largest flow to inventories since June 2023, when 2.1 million BPD were added to stockpiles, and represented a sharp increase from the 280,000 BPD added in July.
• Although China does not disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, estimates can be made by subtracting the amount of crude processed from the total available from imports and domestic output.
• China's refineries processed 59.07 million metric tons of crude in July, which is equal to around 13.91 million BPD, according to data released by the National Bureau of Statistics on September 14.

Petroleum News

• Crude oil prices fell by 0.67% to ₹5,770, pressured by the resumption of production at several U.S. Gulf of Mexico facilities and concerns about weaker oil demand from China.
• The International Energy Agency (IEA) revised its 2024 global oil demand growth forecast downward by 70,000 BPD to 900,000 BPD, primarily due to a slowdown in Chinese demand. - China's oil demand is expected to grow by only 180,000 BPD in 2024, a significant decline as the country deals with a broader economic slowdown and increased adoption of electric vehicles.
• The IEA also noted that global oil demand may plateau by the end of this decade, with demand growth weakening in many key regions.
• In the U.S., crude oil inventories rose by 0.833 million barrels in the week ending September 6, slightly below the expected 1 million rise. Gasoline stocks increased by 2.311 million barrels, while distillate stockpiles rose by 2.308 million barrels, both exceeding market forecasts.
  Meanwhile, China's crude oil imports in August dropped 7% year-on-year to 49.10 million metric tons, though they were up from July’s low of 42.34 million tons.

Expert Opinion

A key factor expected to influence the market this week is the potential aggressiveness of a rate cut by the U.S. Federal Reserve following its September 17-18 meeting. Fed fund futures indicate that investors are increasingly betting on a 50-basis-point cut, rather than a 25-basis-point cut, according to CME FedWatch. Lower interest rates reduce borrowing costs, which can boost economic activity and lift oil demand.