China's Economic Woes Weigh On Oil Prices Once Again

After climbing by 13% in July, oil prices were dragged lower on the first day of August by further disappointing economic data out of China.

Oil bulls thoroughly enjoyed the 13% month-on-month increase in oil prices in July, but the first day of August provided another head-scratcher as Chinese manufacturing contracted in July with the PMI index dropping to 49.2. Perceived as a positive sign for metals markets that expect Beijing to splash the cash on stimulus, Chinese woes have nevertheless halted the rise in oil prices, sending ICE Brent below $85 per barrel. However, should Saudi Arabia extend its 1 million b/d production cut, there might be a new bullish narrative to counter the year-long Chinese blues.

US investment bank Goldman Sachs (NYSE:GS) revised its global oil demand outlook, seeing an all-time high of 102.8 million b/d demand this July and sticking to a $93 per barrel 12-month price projection on a healthier outlook for global economic growth.

As Canada races to meet future power demand, the government of Ontario announced the expansion of the Bruce Power facility, to hit 11 GW capacity and become the world’s largest nuclear plant, as well as three smaller modular reactors.

The UK government pledged to grant hundreds of licenses for North Sea oil and gas exploration over the upcoming years as part of a wider drive to become energy self-sufficient, building on this year’s licensing round that saw 115 bids for offshore projects.

After Australia’s Woodside Energy (ASX:WDS) shut its production platform offshore Trinidad and Tobago, citing an unspecified process safety incident, the island country’s methanol and ammonia plants in Point Lisas were forced to halt operations, too.

US national gasoline prices gained 16 cents per US gallon last week, hitting $3.75/USG on Monday, as heat-related refinery outages curbed product supply and robust countrywide demand lowered gasoline stocks to their lowest July level since 2015.

Nigerian President Bola Tinubu said the scrapping of gasoline subsidies previously provided by the government has saved the government some $1.3 billion in just two months, whilst retail prices have tripled in the same period.

Venture Global LNG’s proposed Calcasieu Pass 2 project received the US Federal Energy Regulatory Commission’s environmental approval, clearing the way for the LNG developer to take an FID later this year on the 20 mtpa capacity liquefaction plant.

The military coup in Niger might put a halt to the country’s oil growth plans as the 110,000 b/d Niger-Benin export pipeline is 75% ready and should be followed by a ramp-up in production from Chinese-operated fields in the Agadem Rift basin.

A long-time favorite of dividend investors, Brazil’s national oil company Petrobras (NYSE:PBR) revised its dividend policy downwards by pledging to allocate 45% of its free cash flow to payouts, down from the current rate of 60%.

Chinese EV battery firms are rapidly increasing their investments in South Korea, with recently announced projects adding up to at least $4.4 billion, qualifying for IRA tax credits that require batteries to be sourced from the US or a free trade partner.

According to EIA data, the volumes of US crude and oil products supplied, a proxy for demand, rose to 20.78 million b/d in May, the highest since August 2019, and will most probably rise even further as official data for June and July trickle in.

International metal traders are bracing for a sizable decline in supply of gallium and germanium, two rare earth metals that the Chinese government has introduced export restrictions for dual-use items taking effect from August 1.

US oil producer Occidental Petroleum (NYSE:OXY) and ADNOC, the national oil company of the UAE, signed an MoU that seeks to explore joint investment in the US and elsewhere in direct carbon air-capture projects with capacity up to 1 mtpa.