Still, data suggests that demand remains resilient internationally, including China: File Image/Pixaby
Traders motivated purely by sentiment – ie., the lingering suspicion that China's economy won't recover anytime soon to pre-Covid levels and thus threatens demand – caused another modest dip in oil prices on Tuesday, even though consumption of the commodity remains strong despite high prices.
Brent settled down 43 cents at $84.03 per barrel while West Texas Intermediate settled down 48 cents to $79.64.
Jim Ritterbusch, president of Ritterbusch and Associates, said, "Saudi and Russian output cuts have been largely negated by weakening crude demand from China that appeared to develop last month and is apt to continue through the rest of the summer."
Jim Ritterbusch, president of Ritterbusch and Associates
Saudi and Russian output cuts have been largely negated by weakening crude demand
Still, refinery runs data from China suggest that demand for oil remains strong and growing, with refiners ramping up processing rates last month (resulting in the average daily number higher both than the average for June and the average for July 2022).
Demand also continues to be robust in the U.S., where crude oil and gasoline inventories were expected to have fallen last week (data from American Petroleum Institute confirmed a 2.4-million-barrel draw compared to the previous week's 6-million-barrel draw).
However, a gloomy outlook was very much in vogue on Tuesday; while Iraq and Turkey's oil ministers reportedly discussing the importance of resuming oil flows after finalizing pipeline maintenance might have been viewed in some quarters as possible relief to global tightening concerns, Ritterbusch said of Iraq's 450,000 barrels per day (bpd) of exports halted by Turkey, "Such an export resumption could add almost a half a million barrels per day to global oil supply in making a significant dent in Saudi Arabia's additional production cut that is expected to extend through next month."
Presumably, the bears would have taken solace in reports on Tuesday that oil production in Nigeria slumped by 15.5 percent in July from June, marking the third month-on-month decline since April.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) revealed that last month's oil production fell to 1,081,396 bpd from 1,248,960 bpd produced in June.
Gbenga Komolafe, chief executive at the NUPRC,said "Currently, Nigeria has the technical allowable capacity to produce about 2.5 million barrels of oil per day; however, arising from the highlighted challenges, our current production hovers around 1.5 million barrels of oil and condensate per day."