In the Asian trading session on Tuesday, oil prices experienced a dip, influenced by a resurgence of the dollar’s strength. Additionally, concerns were raised over sluggish demand in the world’s largest oil-importing nation, China, due to weaker-than-expected trade data.
On Monday, crude oil prices had seen a slight increase from multi-month lows, driven by commitments from Saudi Arabia and Russia to maintain their ongoing supply reductions until the end of the year. In a related development, the United States declared its intention to purchase an additional three million barrels of oil to replenish the Strategic Petroleum Reserve, signaling tightening global supplies.
However, these positive factors were partially offset by the resurgence of the dollar’s strength. Traders also factored in a reduced risk premium related to the Israel-Hamas conflict. Moreover, there was a notable sense of uncertainty surrounding crude demand, especially in anticipation of crucial data on Chinese oil imports.
Furthermore, weak economic data from the Eurozone and the United Kingdom raised concerns about the potential impact of slowing economic growth on oil demand.
As of 22:22 ET (03:22 GMT), Brent oil futures fell by 0.4% to $84.83 per barrel, while West Texas Intermediate crude futures also declined by 0.4% to $80.52 per barrel. Both of these oil contracts had experienced significant losses over the previous week, with growing expectations that the Israel-Hamas conflict would not disrupt Middle Eastern oil supplies.
China’s Trade Data Falls Short, but Imports Show Strength
Data released on Tuesday revealed that China’s exports had contracted more than anticipated in October, resulting in the country’s trade surplus reaching its lowest level in 17 months. However, there was an unexpected increase in imports during the same month, indicating some signs of improved local demand, particularly as Beijing implemented additional stimulus measures.
Nevertheless, the prolonged decline in exports suggests that China’s key economic engines could face more challenges, potentially dampening economic growth in the country and impacting oil demand.
China’s fuel consumption has largely remained subdued throughout the year, with export-oriented refineries accounting for a significant portion of the country’s crude oil demand. Recently, the government introduced new production limits on fuel refiners to reduce their carbon footprint.
China has also been steadily increasing its oil stockpiles with cost-effective Russian crude this year, which could lead to a reduction in imports in the coming months.
