Oil prices extended their losses today over concerns about the fragile state of the global recovery in demand for crude and fuel which were heightened by data showing China’s oil imports declining in May.
Bob Yawger, director of energy futures at Mizhuo Securities in Tokyo, Japan said, “Chinese oil imports at a five-month low … would tend to confirm weakness in the Asia market.”
China’s crude imports declined by 14.6% in May, from a high level a year earlier, with daily arrivals at the lowest level this year, as maintenance at refineries limited demand for oil purchases.
Crude oil prices have been bullish in recent weeks, with Brent up by nearly 40% this year and U.S Oil (WTI) gaining more than 44%, amid expectations of a return of demand as more countries succeed with covid-19 vaccinations.
Restraint on supply by the OPEC+ has also helped buttress prices but major oil importers like India have been going through waves of infections that continue to threaten the expected pickup in global demand in the second half of this year.
Avtar Sandu, senior manager of commodities at Phillip Futures in Singapore stated, “Crude prices are beginning to struggle as demand in Europe and India faces headwinds.”
Brent crude is down 0.5%, to trade at $71.13 a barrel, after declining 0.6% overnight. U.S. oil declined 0.45%, to trade at $68.93 a barrel, having dropped by 0.6% also in the previous session.
What this means
Investors are hesitating because of uncertainties surrounding the demand prospects for oil. Even with the OPEC+ restraints on oil supply, it is not enough to put investors mind at ease. With the Iranian oil possibly coming back into the market, China, the worlds largest importer of oil, reducing its demand and current fears of an increase in global inflation, it is safe to say that oil is in for a bumpy week.