Brent holds on Chinese demand

21 October 2014, News Wires – Brent edged up on Tuesday, holding above $85 per barrel as robust China oil demand supported prices, although gains were capped by oversupply and lingering fears of a weak global economy.

Oil demandImplied oil demand at the world’s largest energy consumer jumped 6.2% in September from August to 10.3 million barrels per day, the highest since February, as crude throughput and imports reached their second-highest level this year amid a continued stockbuild.

Front-month Brent was up $0.13 to $85.53 by Tuesday morning, remaining entrenched at below $100 since early September.

US crude for November delivery gained $0.29 to $83.00, after ending nearly flat at $82.71 on Monday.

“With higher industrial production, we may see an increase in crude demand coming from China moving forward,” analysts at Phillips Futures in Singapore said in a note.

“This likely gives some upward push to crude prices but global crude demand should still remain weak and is likely to persist in the coming quarter.”

Despite the robust oil demand picture, China’s economic growth slowed in the third quarter to its weakest since the 2008/09 global financial crisis, raising expectations that Beijing will need to unveil more stimulus measures to avert a sharper slowdown.

Weak China economic growth added to worries about the global economic outlook which have led the International Energy Agency to slash its world oil demand growth forecast for next year.

“Any price movements should be limited,” Astmax Investments commodity fund manager Tetsu Emori told Reuters.

“We should probably look at the bigger picture of how OPEC would react in their next meeting.”

Some members of the Organization of the Petroleum Exporting Countries have indicated that the group was unlikely to ease the oil supply glut by cutting output ahead of its 27 November meeting. Others are preparing 2015 budgets with lower oil prices.

While Libya supports an output cut, other African members seemed less keen.

About the Author