Oil Down on China GDP Data, Suply Glut

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended lower Monday afternoon under pressure from data showing China's economic growth eased to a six-year low while supply outpaces demand. A stronger dollar added pressure on the oil complex.

"China data was not very inspiring, and fears of more crude from Iran is adding to weakness," said analyst Phil Flynn at Price Futures Group in Chicago. "Iran talk that they may be pumping a lot of oil is not very encouraging."

Others agreed.

"The market is bracing for added supply, with Iran saying it might be able to produce 3.4 million barrels per day within six to seven months of sanctions being lifted, up from 2.8 million bpd in recent months," said analyst Tim Evans at Citi Futures in New York.

NYMEX November West Texas Intermediate futures tumbled $1.37 to $45.89 barrel at settlement after inside trade, with the contract set to expire on Tuesday. December ICE Brent crude declined $1.85 to a $48.61 bbl settlement, near a two-day low at $48.57.

NYMEX November ULSD futures plunged 4.75 cents to a $1.4491 gallon settlement, off a two-day low at $1.4481. November RBOB futures plummeted 7.66 cents to a $1.2514 gallon settlement, off a fresh nine-month spot low at $1.2500.

On Wall Street, U.S. stock markets moved higher while the dollar index rose to a one-week high on risk-off trade after China announced its disappointing Gross Domestic Product. The country's National Bureau of Statistics said third quarter GPD grew quicker than expected, at 6.9% versus estimates calling for 6.8%, but below the 7.0% growth rate for the first two quarters of this year. That's also the slowest growth rate for the world's second biggest economy since first quarter 2009 despite a raft of stimulus measure implemented this year.

While Beijing has repeatedly said the economy will grow at 7.0% in 2015, a number of analysts believe China won't meet the target and the impact of slow growth is seen spreading globally.

Worries about China's economic slowdown have hammered the oil market since the summer, exacerbating concerns about demand. China is the world's second biggest consumer of energy after the United States, and its prior robust growth underpinned higher oil prices in the past decade until last year when excess supply caused a precipitous decline in oil prices.

The glut in global oil supply remains a worry for oil traders despite slowing production in the United States.

The Organization of Petroleum Exporting Countries is pumping more than an agreed 30 million bbl output ceiling, with the group last week saying its output rose 109,000 bpd in September to 31.57 million bpd.

Iran also expects to boost its supply after its deal with major powers went into effect over the weekend. The July 14 nuclear agreement was officially adopted on Sunday under which Tehran agreed to make cuts in its nuclear programs in exchange for sanctions relief. The U.S. expects Iran will take months to live up to its end of the deal, so there probably won't be sanctions relief before that happens.

Domestically, after peaking in April at 9.6 million bpd, domestic crude oil production has since fallen and declined 80,000 bpd to 9.1 million bpd in the week ended Oct. 9, the Energy Information Administration reported last week.

Crude oil inventories grew by 7.6 million bbl, the highest increase in six months, EIA added. Active U.S. oil rigs fell 10 last week and 995 lower than a year earlier, according to Baker Hughes. Rig counts provide a guide to production trend.

For the week-ended Oct. 16, analysts expect to see another build of 2 million bbl for crude stocks, including 500,000 bbl at Cushing, Oklahoma, delivery point for NYMEX-traded WTI.

Global production of refined oil products is also reportedly running ahead of demand, said Barclays Capital.

George Orwel can be reached at george.orwel@telventdtn.com