Oil prices dip while the market anticipates China data to assess demand

07 Nov, 2023

Oil prices dip while the market anticipates China data to assess demand

Oil prices retreated on Tuesday, relinquishing most of the gains from the previous day, driven by apprehensions of weakening demand in China. Investors are closely monitoring trade data scheduled for later in the day to gauge the demand of the world's second-largest oil consumer.

Brent crude futures dropped by 23 cents, or 0.3%, to $84.95 per barrel by 0127 GMT, while U.S. West Texas Intermediate (WTI) crude stood at $80.59 per barrel, down by 23 cents, or 0.3%.

On Monday, both benchmarks had advanced by approximately 30 cents after top oil exporters Saudi Arabia and Russia reiterated their commitment to maintaining additional voluntary oil supply cuts until the end of the year.

Toshitaka Tazawa, an analyst at Fujitomi Securities, noted, "Oil prices were supported by continued output cuts by Saudi and Russia the previous day, but investors' attention has shifted to demand, especially in China." He emphasized that all eyes are currently focused on China's data releases this week.

China is set to unveil its import and export figures for October on Tuesday at 0300 GMT, with forthcoming data on bank lending, credit, and key consumer price inflation (CPI) due on Thursday. Tazawa emphasized that the future of oil prices may involve a tug-of-war near current levels, with developments on both the supply and demand sides playing a crucial role. He added that the situation in the Middle East could lead to a significant shift in this trend if tensions increase.

In the realm of supply, Saudi Arabia reaffirmed its commitment on Sunday to continue the additional voluntary cut of 1 million barrels per day (bpd), which translates to a production level of approximately 9 million bpd for December. Moscow also announced its intent to maintain the additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.

Furthermore, Venezuela's state-owned PDVSA is engaged in discussions with local and foreign oilfield firms to secure equipment and services that would help revive declining output. This development comes after the U.S. eased sanctions on the country.