Oil Plummets On China Data Despite OPEC's Bullish Stance On Economy

by Ship & Bunker News Team
Tuesday November 7, 2023

Oil prices on Tuesday suffered a significant plunge as demand concerns yet again gripped investors – even though the data driving these concerns in some cases revealed that demand was robust.

Brent settled down $3.57, or 4.2 percent, at $81.61 per barrel, while West Texas Intermediate settled down $3.45, or 4.3 percent, at $77.37.

The analytical focus on Tuesday was data from China showing that total crude imports in October contracted at a quicker pace than expected.

However, the figures still revealed robust demand growth both year on year and month on month.

That did not prevent Fiona Cincotta, analyst at City Index, from stating that, "The data signals the continued decline in the Chinese economic outlook driven by deteriorating demand in the country's largest export destination: the West."

Crude trading on Tuesday was said to have also been influenced by fading investor enthusiasm about a peak in global interest rates: this was driven by Neel Kashkari, president of the Minneapolis Federal Reserve, stating that the U.S. Federal Reserve will likely have to hike rates again to reduce inflation to a 2 percent target, and that high rates will cause weaker demand in the new year.

As if to reinforce bearish sentiment, Bloomberg on Tuesday noted that the prompt spread for WTI — the difference in prices between its two nearest contracts — “narrowed to its weakest level since July, suggesting supplies remain ample.”

Also on Tuesday, Saudi Arabia’s state-owned Saudi Aramco reported a 23 percent drop in net profit in the third quarter, down to $32.6 billion compared to $42.4 billion for the same period past year but higher than expectations for a $31.8 billion profit.

Aramco attributed the drop to “the impact of lower crude oil prices and volumes sold.”

Meanwhile, flying in the face of Tuesday’s overall analytical gloom was Haitham Al Ghais, secretary general of the Organization of the Petroleum Exporting Countries (OPEC), who told the Argus European Crude Conference in London that “The economy, despite the challenges, is still doing quite well….we are positive on demand, we’re still quite robust on demand.”

Al Ghais added that, “We continue to monitor supply and demand fundamentals on a daily basis [and] when the [OPEC] ministers meet in Vienna at the end of this month they will review all of this and take appropriate measures.”