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The Shanghai Gaoqiao Company refinery in Shanghai.
Johannes Eisele/Agence France-Presse/Getty Images
Oil futures finished higher on Tuesday, with U.S. prices reclaiming the $40 mark a day after settling at their lowest in a week, as data showed a jump in Chinese crude imports.
“Chinese crude oil imports rose to the equivalent of 11.8 million barrels per day in September, putting them 2% up on the previous month,” said Carsten Fritsch, analyst at Commerzbank, in a note. “The anticipated cooling following the buying spree in the (early) summer has yet to materialize, in other words,” he said. “Chinese crude oil imports were 12.7% up year-over-year in the first nine months.”
However, Fritsch argued the strong Chinese demand is unlikely to offset a range of bearish factors over the longer run.
These include a sharp jump in Libyan crude production as its largest oil field comes back online, which could double the country’s crude production to 650,000 barrels a day within a few weeks, he said. The end of a Norwegian oil strike and the return of production in the Gulf of Mexico were also credited for Monday’s crude selloff.
West Texas Intermediate crude for November delivery CLX20, +2.05% CL.1, +2.05% rose 77 cents, or nearly 2%, to settle at $40.20 a barrel on the New York Mercantile Exchange. The global benchmark, December Brent crude BRNZ20, +0.07% BRN00, +0.07%, tacked on 73 cents, or almost 1.8%, to $42.45 a barrel on ICE Futures Europe.
“WTI may be holding above $40 for now but I don’t expect that to last,” said Craig Erlam, senior market analyst at Oanda, in a Tuesday note. “It was given a bump by Hurricane Delta and strikes in Norway, but both of those risks have passed and Libyan output is rising.”
As of Tuesday, the U.S. Bureau of Safety and Environmental Enforcement estimated that 43.57% of Gulf oil output was shut in. That’s an improvement from 69.4% on Monday.
“Heading into a tough period for the global economy when restrictions are going to become more severe, the outlook for oil isn’t great,” said Erlam.
In a monthly report Tuesday, the Organization of the Petroleum Exporting Countries left its outlook for 2020 oil demand relatively unchanged, penciling in a decline of 9.5 million barrels a day, year on year, to reach 90.3 million barrels a day.
For 2021, however, OPEC revised demand lower by 80,000 barrels a day, forecasting growth of 6.5 million barrels a day to reach 96.8 million barrels per day, with the cut largely reflecting a lower growth outlook for both developed and emerging market regions compared to the September forecast.
Separately, the annual World Energy Outlook report from the International Energy Agency released Tuesday said that global energy demand is expected to rebound to its pre-crisis level in early 2023, under a scenario in which COVID-19 is brought under control in 2021 and the global economy returns to pre-crisis levels that year.
Read: IEA’s best case scenario calls for energy demand recovery in 3 years
Weekly data on U.S. petroleum supplies will be released by the Energy Information Administration on Thursday, a day later than usual because of Monday’s U.S. federal holiday.
On average, domestic crude supplies are expected to post a decline of 2.3 million barrels for the week ended Oct. 9, according to a survey of analysts by S&P Global Platts. The survey also showed expectations for supply declines of 1.8 million barrels for gasoline and 2.5 million barrels for distillates, which include heating oil.
On Nymex Tuesday, November gasoline RBX20, +0.45% rose 0.6% to $1.1827 a gallon and November heating oil HOX20, +0.98% added 1% to $1.169 a gallon.
November natural gas NGX20, -1.56% fell by 0.9% to $2.855 per million British thermal units, after scoring a gain of 5.1% on Monday.
