Oil Drops On China's Economic Woes And Vague Stimulus Strategy

Meanwhile, Russia continues to do brisk business despite the G-7 price caps: File Image/Pixabay

Oil on Monday continued its downward trajectory, the outcome of a one-two punch of another lowered demand growth outlook as well as more bad economic news from China.

After it was learned that China's crude imports for the first nine months of 2024 fell nearly 3 percent from last year to 10.99 million barrels per day (bpd), Brent settled down $1.58 at $77.46 per barrel; West Texas Intermediate settled down $1.73 to $73.83 per barrel.

China's deflationary pressures also worsened in September, and negative sentiment wasn't helped by the fact that although Beijing pledged to "significantly increase" debt to kick start its economy, it did not disclose any details about the size or content of its stimulus package.

Mukesh Sahdev, the global head of commodity markets-oil at Rystad Energy, said, "The lack of a clear timeline and the absence of measures to address structural issues, such as weak consumption and reliance on infrastructure investments, have only increased ambiguity amongst market participants."

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) in its latest monthly report predicted that global oil demand will rise by 1.93 million bpd in 2024, down from 2.03 million bpd it expected last month; China was said to account for the majority of the downgrade.

Monday's trading was also influenced by Israeli prime minister Benjamin Netanyahu telling Washington he is willing to strike military rather than oil or nuclear facilities in Iran, according to the Washington Post.

Rohan Reddy, head of international business development & corporate strategy at Global X Management, said, "The reaction by the market is likely taking off or tapering the geopolitical risk premium on oil for now."

In other oil news on Monday, more evidence of the questionable efficacy of the G-7 price cap on Russian petroleum exports came in the form of data from Clearview Energy Partners showing that Russian crude prices over the last four weeks have averaged about six cents below that of Brent, far off the trading discount when the cap was initiated.

Also, according to Lloyd's List, record volumes of Russian oil were carried on "dark fleet" and sanctioned tankers supposedly without insurance throughout September (69 percent of all crude shipped in September was carried on dark fleet tankers and 18 percent was carried on tankers owned by Russian government-controlled Sovcomflot).