Oil Prices Under Pressure As China's Economic Woes Worsen

Disappointing economic data out of China weighed on oil prices on Tuesday morning, with markets unsure if current government intervention is enough to rejuvenate the country’s economy.

In Nigeria, three months since President Bola Tinubu scrapped the country’s $10 billion fuel subsidy, the country’s gasoline demand has halved to 35-40 million liters amidst tripling gas prices.

With this, one of the key gasoline export outlets of European gasoline has greatly shrunk in volume and the upcoming launch of the 650,000 b/d Dangote refinery will exacerbate the arbitrage even more.

Dangote, so far mired in delays and cost overruns, will become by far the largest refinery on the African continent once it is commissioned in late 2023, eliminating Nigeria’s need for imported fuel.

Nigeria’s gasoline imports declined to a “mere” 230,000 b/d last month according to Kpler data, down from 480,000 b/d in February, and should fall to zero once Dangote reaches full capacity and produces 330,000 b/d of the light distillate.

The middle of August usually sees the lowest level of crude oil trading, both on the physical and paper sides. This month is no exception, with very little in the way of strong pricing signals and the key benchmarks mostly trending sideways. China has provided some bearish sentiment, however, with a further slowdown in industrial output weighing on oil prices on Tuesday morning. The Chinese Central Bank’s cutting of corporate lending rates to 2.5% helped to offset some of that downward pressure, but both WTI and Brent had fallen by more than 1% on Tuesday morning.

The US Energy Information Administration expects oil and natural gas production from the country’s shale-producing regions to 9.41 million b/d and 98.3 billion cubic feet per day, respectively, the second month-on-month decrease in a row, reports OilPrice.com.

The US Navy warned vessels transiting the Strait of Hormuz they should steer clear of Iranian territorial waters to avoid possible seizures in the key passageway, home to 21% of global flows, with four tankers already detained by the Iranians in 2023 so far.

The United Nations completed the removal of more than 1 million barrels of oil from the decaying supertanker Safer, idled off Yemen’s Red Sea coast, averting a catastrophe after it managed to raise $120 million for the operation.

Data from China’s National Bureau of Statistics shows refinery throughputs came in at 14.87 million b/d in July, up 17.4% year-on-year and the third-highest reading on record, as robust summer travel kept domestic demand elevated.

A US Circuit Court of Appeals in Virginia rejected an environmentalists’ challenge to federal approvals for the $6.6 billion Mountain Valley natural gas pipeline built by Equitrans Midstream (NYSE:ETRN), paving the way for a final regulatory blessing.

Buoyed by low stocks, money managers and other portfolio investors have bought middle distillates in 12 of the most recent 14 weeks, adding another 10 million barrels of futures and options in US and European diesel in the week ending August 08.

Following a month-long disruption to oil exports from Nigeria’s key crude terminal Forcados, liftings have resumed again as project operator Shell (LON:SHEL) managed to contain to what appears have been an oil leak at the export facility.

The US Department of Energy pledged $1.2 billion in federal grants to two direct carbon capture projects in Texas and Louisiana that could remove up to 2 million tonnes of emissions, one of which is Occidental’s (NYSE:OXY) South Texas DAC Hub.

For the first time on record, an Indian refiner settled the purchase of crude oil from the United Arab Emirates in the local currency, the Indian rupee, with India’s national oil company IOC (NSE:IOC) paying ADNOC for a 1-million-barrel delivery.

The US National Oceanic and Atmospheric Administration revised its outlook for the 2023 Atlantic hurricane season, saying there’s a 60% likelihood of an above-normal season with as many as 21 named storms popping up between June and November.

Several producers of electric vehicles have lowered their EV prices in China, with Tesla announcing a two-month $1,100 subsidy for its Model 3 car as its sales fell to 64,000 units in the country last month, a whopping 31% decrease from June numbers.

Libya’s national oil company NOC wants to offer local Libyan firms upstream licenses to develop already discovered small fields that it doesn’t have the capacity to work on, seeking to boost production capacity to 2 million b/d.

Apart from ramping up crude oil production to 3.2 million b/d, Iran also stated it had launched production from the long-delayed phase 11 of the super-giant South Pars gas field, with initial flows coming at a rate of 10-12 million cubic meters per day.