Asia/Pacific News
China Signals Oil Prices are Too Low
A decision by China to halt fuel price cuts is being called "a first" by market analysts, who believe the nation is sending a message to the Organization of Petroleum Exporting Countries (OPEC) that oil prices are too low, Bloomberg reports.
China's strategy is outlined in a new report from Sanford C. Bernstein & Co. and comes on the heels of Nigeria and Indonesia stating that OPEC may need to call an emergency meeting before year's end to stabilize prices that have further tumbled since the cartel's December 4 meeting.
In the report, China's decision to suspend price cuts - which is said to be necessary to slow consumption growth and reduce automobile emissions - is viewed as something that gives oil a price floor of about $38 per barrel.
International Energy Agency figures show that China's demand for gasoline increased 10.4 percent in the first 10 months of 2015 compared to the same time frame last year.
Analyst Neil Beveridge writes, "China's decision to not cut refined product (gasoline, diesel) prices is a first."
He goes on to state that the move "sends a signal to OPEC that its largest customer (China) believes that oil prices are too cheap."
The report also states that OPEC is trying to "increase demand and reduce non-OPEC supply growth" by forcing prices lower.
The analysts conclude that China is telling OPEC members "that pricing is now too low and they will gain incrementally less in terms of demand growth from further cuts in prices."
Yesterday, Ship & Bunker reported that Russia is now preparing for $30 per barrel oil in 2016, with the country's finance minister Anton Siluanov saying "You have to prepare for difficult times."
