Sluggish Chinese Demand, Rising U.S. Output, and Shifting Global Dynamics Put Oil Prices Under Pressure

Petroleum Price

• Crude oil prices on Friday climbed Rs68 to Rs5,945 per barrel in futures trade as participants widened their positions following a firm spot demand.
• On the Multi Commodity Exchange, crude oil for November delivery traded higher Rs68 or 1.16 per cent at Rs5,945 per barrel in 12,765 lots.
• Analysts said raising of bets by participants kept crude oil prices higher in futures trade.
• Globally, West Texas Intermediate crude was trading marginally higher at $70.68 per barrel, while Brent crude was trading flat at $74.45 per barrel in New York.

Petroleum Demand and Supply

• "While markets appear to have focused on reports that the U.S. urged Israel not to target oil infrastructure, driving the latest price easing, these risks remain high as rhetoric remains heated," Citi analysts wrote.
• Citi also noted downward demand revisions this week by OPEC and the IEA, as well as the return to normal of Libyan oil production, while saying the potential impact of China's emerging economic stimulus plans on oil demand is uncertain.
• China's economy grew by 4.6% in Q3, the slowest pace in 18 months, and the country's refinery output fell for the sixth straight month, adding to concerns over sluggish oil demand in the world's second largest economy that have been weighing on oil prices.
• In the U.S., crude production smashed another record, as the EIA reported a 100k bbl/day rise last week to 13.5M bbl/day, compared to the previous peak of 13.4M bbl/day first achieved two months ago.
• Helping to put a floor under prices, the EIA also said U.S. crude oil, gasoline and distillate inventories fell last week.

Petroleum News

• In China, the world’s top oil importer, the economy grew at the slowest pace since early 2023 in the third quarter, though September consumption and industrial output beat forecasts.
• “China is key to the demand side of the equation so that is very much weighing on prices here today,” said John Kilduff, partner at Again Capital in New York.
• China’s refinery output declined for the sixth straight month as thin refining margins and weak fuel consumption curbed processing.
• “We cannot ignore the impact of electric vehicles in China,” said Neil Atkinson, Paris-based independent energy analyst and former head of the oil division at the IEA.
• “There are various factors at play here, economic weakness in China but also the move towards the electrification of transport.” Electric vehicle sales in China jumped 42 per cent in August and reached a record high of over one million vehicles.

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Expert Opinion

• Chinese data shows tentative signs of improvement, but recent briefings on additional economic stimulus left market participants underwhelmed. In the US, crude production smashed another record last week, according to the Energy Information Administration (EIA) on Thursday, as output rose by 100,000 barrels per day (bpd) in the week to Oct 11 to 13.5 million bpd, from its previous peak of 13.4 million bpd first hit two months ago.
• Positive US economic data has helped alleviate some growth concerns, but market participants continue to monitor potential demand recovery in China following recent stimulus measures.