China Becomes Bearish Factor For Oil Prices Again

Brent crude fell below $85 per barrel on Tuesday as poor import/export data from China weighs on oil markets.

China has become the most important bearish factor weighing on oil prices recently, with July export-import data showing the Asian country’s economy is struggling to outgrow its post-COVID woes.

Overseas exports of Chinese goods have recorded the worst month-on-month decline since February 2020 last month, down 14.5% in dollar terms, with weak consumer spending and investment growth aggravating the outlook.

China’s crude imports have followed suit and decreased by 19% month-on-month to 10.3 million b/d, the lowest daily rate since January even though onshore crude inventories have continued to climb.

The Chinese Central Bank set the yuan at the weakest level in almost a month today, seeking to stimulate further exports by means of a slightly devalued currency, however with demand slowing in the US, too, such measures might not be enough.

Storm clouds are gathering over the oil markets, with weaker-than-expected Chinese macroeconomic data disappointing again and most probably putting an end to six consecutive weeks of Brent/WTI price gains. The bullish effect of Saudi Arabia’s production cut extension and Russia’s export curbs in September has evaporated, though disruptions in US refinery operations might boost product cracks further and help recoup some of the lost pricing territory as ICE Brent is back at $84 per barrel.

Saudi national oil company Saudi Aramco (TADAWUL:2222) reported a 38% year-on-year decline in Q2 net profit due to lower prices and curtailed oil supply, aggravated by a collapse in petchem margins, nevertheless raking in a tad north of $30 billion.

The Russian-flagged Sig tanker was struck by a Ukrainian sea drone whilst approaching the Kerch strait, with the missile hitting the US-sanctioned vessel near its engine room and seeing significant damage as Black Sea oil flows become part of the war.

The TotalEnergies-operated (NYSE:TTE) 225,000 b/d Port Arthur refinery in Texas was forced to shut down its FCC unit after a leaky pump, adding pressure onto the tight US gasoline market only days after a similar incident happened in Baton Rouge, LA.

According to Kpler data, Kuwait’s LNG imports reached an all-time high in July with 0.9 million tonnes of LNG delivered to Al Zour amidst extremely high temperatures, with market reports indicating KPC bought six additional spot LNG cargoes for September.

Merely two days after Iran’s foreign minister visited Islamabad, Pakistan suspended the completion of the multi-billion Iran-Pakistan gas pipeline citing US sanctions as the main reason, though pledging to restart works as soon as sanctions are removed.

A German environmental group filed a lawsuit with the Federal Administrative Court against the operator of the Lubmin FSRU regasification plant, saying the environmental permits of Deutsche ReGas were inadequately assessed.

The California Supreme Court struck down Monterey County’s ban on oil and gas drilling in California, handing a win to US major Chevron (NYSE:CVX), saying counties cannot ban fossil fuels as only state regulators decide what methods can be used.

Pipeline transportation along the northern Druzhba pipeline system to Poland and Germany was halted after a leak in central Poland, however Russian oil supplies along this route are already under EU sanctions, minimizing the impact of the incident.

Suffering several power outages in 2023 alone, Norway’s government wants the Hammerfest LNG terminal to be connected to the hydro-dominated national grid by 2030, saving 2% of the country’s annual emissions.

Chinese coal consumers imported 39.26 million tonnes in July, marking the second straight month when inflows are significantly above the average of 37 million tonnes, as abnormal heat is forcing power generators to run at maximum capacity.

The Nigerian security forces launched airstrikes at vessels carrying stolen crude in the Niger Delta this week, only a couple of days after the army destroyed 36 illegal refining sites across the region as part of a wider clampdown.

Posting EBITDA figures that were down 50% year-on-year at 9.4 billion, Swiss-based trading major Glencore (LON:GLEN) reiterated its interest in further M&A deals regardless of how the Teck takeover saga ends.

The CEO of Venezuela’s national oil company PDVSA Pedro Tellechea said the firm is working to fix leaks and contain spills around Lake Maracaibo, a key production hub, however, they are yet to start dredging operations.