Oil Price Fundamental Daily Forecast – Impact of China Import Data Not Enough to Offset Demand Worries

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher shortly after the regular session opening on Tuesday as robust China data offset returning supply in Norway, the Gulf of Mexico and Libya. China, the world’s top crude oil importer, took in 11.8 million barrels per day (bpd) of oil in September, up 5.5% from August and up 17.5% from a year earlier, customs data showed.

At 13:14 GMT, December WTI crude oil futures are trading $40.35, up $0.62 or +1.56% and December Brent crude oil is at $42.28, up $0.56% or +1.34%.

Oil Demand from China

China’s crude oil imports rose 2.1% in September from a month ago as some delayed cargoes finally cleared customs after a months-long port congestion eased, while onshore storage capacity was expanded.

China, took in 48.48 million tonnes of oil last month, according to data from the General Administration of Customs on Tuesday, equivalent to 11.8 million barrels per day (bpd).

That compares to 11.18 million bpd in August and 10.04 million bpd in September last year, but still below the record high level of 12.94 mln bpd imported in June.

For the first three quarters of 2020, China imported a total of 416 million tonnes of crude oil, data showed, or about 11.08 million bpd, up 12.7% from the same period last year.

Storage facilities holding crude stocks at major Chinese ports were close to full in July and August following a bargain purchase amid a collapse of oil prices in April due to the coronavirus pandemic.

IEA Pushes Back Energy Demand Recovery

The International Energy Agency (IEA) – which advises Western governments on energy policy – said in its World Energy Outlook that in its central scenario a vaccine and therapeutics could mean the global economy rebounds in 2021 and energy demand recovers by 2023.

But under a “delayed recovery scenario”, it said the energy demand recovery is pushed back to 2025.

“The era of global oil demand growth will come to an end within the next 10 years, but in the absence in a large shift in government policies, I don’t see a clear sign of a peak,” IEA chief Fatih Birol told Reuters.

Daily Forecast

We’re probably looking at a knee-jerk reaction to the data from China, which is likely to be short-lived because supply is expected to rise and global demand is expected to remain muted.

The movement in China is a little deceiving. Because the country bought so much oil when it was extremely cheap in April, storage facilities are probably near capacity and the country is not likely to be an aggressive buyer after September. In other words, we expect its buying to level off into the end of the year.