A bullish assessment of China’s demand outlook from the International Energy Agency couldn’t provide lasting support for oil futures Tuesday morning, with crude futures giving up a round of early gains.
Also, late Monday, the U.S. Energy Department said that it plans to buy up to 3 million barrels of crude oil for the nation’s Strategic Petroleum Reserve.
Price action
-
West Texas Intermediate crude for June delivery
CL00,
-0.20% CL.1,
-0.20% CLM23,
-0.20%
were off 8 cents or 0.1%, at $71.03 a barrel on the New York Mercantile Exchange. -
July Brent crude
BRN00,
-0.24% BRNQ23,
-0.20% ,
the global benchmark, fell 15 cents, or 0.2%, to $75.08 a barrel on ICE Futures Europe. -
Back on Nymex, June gasoline
RBM23,
-0.66%
fell 0.6% to $2.513 a gallon, while June heating oil
HOM23,
-0.35%
was off 0.2% at $2.374 a gallon. -
June natural gas
NGM23,
-1.22%
dropped 1.2% to $2.512 per million British thermal units.
Market drivers
Crude futures traded higher after the Paris-based International Energy Agency, in its monthly report, said China’s demand for oil is growing at a faster-than-expected pace. The growing demand threatens to tighten crude markets and send oil prices higher as supply struggles to keep up, the report said.
The IEA lifted its forecast for global oil demand growth in 2023 by 200,000 barrels a day, to 2.2 million barrels a day. That would bring total demand to 102 million barrels a day, up 100,000 barrels a day from the agency’s April forecast. IEA estimated China’s crude demand hit a record 16 million barrels a day in March and that the country will account for 60% of growth in global oil demand in 2023.
However, economic data from China was seen as a negative for crude, said Ricardo Evangelista, senior analyst at ActivTrades.
China’s National Bureau of Statistics said retail sales, a key consumption metric, rose 18.4% from a year earlier in April, accelerating from a 10.6% increase in March, according to Dow Jones Newswires. Economists surveyed by The Wall Street Journal had forecast growth of 20.5% as the economy recovered from Covid lockdowns lifted only late last year.
Industrial production rose 5.6% in April from a year earlier, accelerating after a 3.9% increase in March but coming in below the 11% growth forecast by economists.
The move by the Biden administration to begin refilling the SPR may help to underpin prices though, analysts said.
“The volumes are relatively small, particularly when you consider the DOE released more than 220 million barrels from the SPR in 2022. However, the move does show that the U.S. administration is serious about refilling the SPR, something that the market started doubting in recent months,” said Warren Patterson and Ewa Manthey, strategists at ING, in a note.
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