Oil Surges Despite Mixed China Data, But Market Still Mired By Conflicting Views

China's stockpiles are growing but imports are lessening: File Image/Pixabay

Mixed data from China did little to dissuade crude traders from exhibiting an unusual expression of optimism on Monday with a surge of oil prices in excess of 2 percent, even though the data showed industrial output growing by only 5.6 percent in May from a year earlier compared to 6.7 percent in April.

And even though this tailed earlier reports of U.S. consumer sentiment falling to a seven-month low in June, West Texas Intermediate on Monday settled up $1.88, or 2.4 percent, at $80.33 per barrel, while Brent settled up $1.63, or 2 percent, at $84.25.

As with other data that has caused crude trading to become rudderless these past few months, the China data from the National Bureau of Statistics contained good news in the form of retail sales rising 3.7 percent versus 2.3 percent in April.

Ole Hansen, an analyst at Saxo Bank, said, "The outlook for strong fuel demand into the coming quarter and Saudi reassurance about the October hike being subject to prevailing conditions and added focus on quota breakers to bring production down and into line all seems to be supporting."

Hansen was referring in part to the Organization of the Petroleum Exporting Countries (OPEC) earlier forecasting relatively strong oil demand growth of 2.2 million barrels per day (bpd) but also assuring the market that it would adjust output if circumstances required.

Helima Croft, head of global commodity strategy at RBC Capital Markets, was equally upbeat about the prospects of the oil market moving forward: she predicted stockpiles should fall by 850,000 bpd in the third quarter and said, "It's more of a sense that this market is likely to get tighter as we go deeper in summer."

Still, the market seemingly remains mired in conflicting sentiment, as evidenced by a Bloomberg survey showing that market watchers believe China's oil refining will be flat or decline this year for the first time in two decades, excluding a downturn in 2022 due to the pandemic.

In other oil news on Monday related to China, Reuters calculated that China accelerated crude stockpiling in May amid lower refining throughput and weaker crude imports; the news agency estimated that the nation added 1.08 million bpd of crude to its commercial or strategic inventories last month, up from 830,000 bpd in April.

The acceleration of the stockpiling is a concern due to the corresponding slowdown in imports this year and a slump in refining output.