September 29, 2022

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Oil slips on fears of slowing Chinese demand

Oil slips on fears of slowing Chinese demand

Stacks of a Total Grande Potts oil refinery seen just after sunset, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann

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  • China’s economy slowed in March
  • The Libyan National Oil Corporation declares Zueitina a force majeure and warns of closures
  • Russian oil production is down 7.5% in April so far – IFAX, citing a source

TOKYO/LONDON (Reuters) – Oil fell on Monday as concerns about slowing demand in China balanced support from worries about tight global supply and a worsening Ukraine crisis.

China’s economy slowed in March as consumption, real estate and exports took a hit, sparking faster-than-expected first-quarter growth numbers and exacerbating expectations already weakened by COVID-19 restrictions and the Ukraine war. Read more

Brent crude fell 19 cents, or 0.2 percent, to $111.51 a barrel at 0825 GMT, retreating from its highest level since March 30 at $113.80 hit earlier in the session. US West Texas Intermediate was down 19 cents, or 0.2%, at $106.76.

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“Some Asian investors took profits because they became concerned about slowing demand in China,” said Satoru Yoshida, commodity analyst at Rakuten Securities.

Monday’s data also showed that China refined 2% less oil in March than a year earlier, with productivity falling to the lowest level since October, as a surge in crude prices slashed profit margins and tightened shutdowns on demand. Read more

Oil surged to its highest level since 2008 in March, with Brent crude briefly hitting $134, as Russia’s invasion of Ukraine heightened supply concerns due to sanctions against Russia and buyers shunning Russian oil.

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Adding to the pressure on the supply side, Libya’s National Oil Corporation on Monday declared a case of force majeure at the Zueitina oil port and warned that a “painful wave of closure” had begun to hit its facilities. Libya suspended production from the El Feel oil field on Sunday. Read more

Russian production fell 7.5 percent in the first half of April from March, Interfax news agency reported on Friday, and European Union governments said last week that the bloc’s executive body was preparing proposals to ban Russian crude.

These comments came before the escalation of tensions in the Ukraine crisis. The Ukrainian authorities said that rockets landed in Lviv in the early hours of Monday morning, and explosions rocked other cities, while Russian forces continued to bombard them after declaring their almost complete control of the port of Mariupol. Read more

“The continuation of the war between Russia and Ukraine with no signs of a ceasefire has fueled supply concerns, especially as demand is expected to pick up as the northern hemisphere driving season approaches,” said Chiyuki Chen, senior analyst at Sunward Trading.

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(Additional reporting by Yuka Obayashi and Alex Lawler.) Editing by Jacqueline Wong

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