Brent at $55-56, China growth slows, Saudi output at max
Brent Crude was trading at shy of $56 on Tuesday as data from China suggested a slowdown in its growth, part of the “go fast, go slow” cycle, while oil output at OPEC-driver Saudi Arabia was still at an all-time high.
The HSBC/Markit PMI flash for China was at an 11 month low of 49.2 against a figure of 50.7. The demarcation between expansion and contraction is 50.
The IMF recently forecast that China’s growth would slow to 6.9% next year, well off the torrid pace set for over a decade. Even that downward revision is in trouble, as more signs appear of crack in the Chinese economy, according to 24/7 Wall St.com.
Chinese manufacturing may have slowed so much because of trouble with economies in the EU and Japan. The U.S. economy may be large, but cannot carry China on its shoulders.
Brent futures for May delivery were 20 cents down at $55.72 in early trading, while U.S. crude dropped 31 cents to $47.14 a barrel, widening its discount to Brent to $8.58 a barrel.
Meanwhile, Saudi Arabia around 10 mln bpd, close to an all-time high and about 350,000 bpd above its February quota.
OPEC’s decision to fight for market share rather than cutting output has contributed to a halving in oil prices since June as the global surplus of oil supplies has grown.
The market is expected to be at its weakest in the second quarter as winter fuel demand wanes while peak summer driving activity is yet to kick in, according to Reuters. Energy consultancy FGE forecasts a global surplus of 2 mln bpd between April and June.
U.S. crude stocks, which already stand at their highest in at least 80 years, were forecast to have risen for an 11th recordbreaking week, a preliminary Reuters survey showed.
Meanwhile, in another report, Bloomberg suggested that with oil and natural gas prices constantly fluctuating, the biggest gainers will be storage companies in the U.S., as well as the likes of Vitol, whose subsidiary VTT Vassiliko started operating in Cyprus at the end of December.