Oil slips on China economic data

Market sentiment supported by supply cuts agreed last week as IEA expects deficit in supply next year

Oil prices slipped yesterday after China reported slower economic growth, pointing to lower fuel demand in the world’s biggest oil importer, although market sentiment was supported by supply cuts agreed last week by major crude producers.

Brent crude was down 30 cents at $61.15 per barrel by 1430 GMT, on course for a decline last week of around 0.7 per cent. US light crude was 30 cents lower at $52.28.

“The energy complex is on the back foot this morning as a batch of soft Chinese economic data triggers a flurry of pre-weekend profit-taking,” PVM Oil analyst Stephen Brennock said.

“This pullback provides a timely reminder that current levels of upside potential are meek at best.” China, the world’s No. 2 economy, yesterday reported some of its slowest growth in retail sales and industrial output in years, highlighting the risks of its trade dispute with the United States.

Refinery throughput

Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, though runs were 2.9 per cent above year-ago levels.

“For the time being until the Opec cuts start kicking in, the market is oversupplied in the short term,” said Tony Nunan, oil risk manager at Mitsubishi Corp. “If China is slowing down, that’s definitely a concern.”

The International Energy Agency said on Thursday it expected a deficit in oil supply by the second quarter of next year, provided Opec members and other key producers stuck closely to last week’s deal to cut output.

“The Opec cuts will have a substantial impact on first quarter 2019 balances compared with this quarter, but market observers may need to wait for the cuts to percolate to inventory data,” Barclays analyst Michael Cohen said in a note.