Oil Futures Down on China Data

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery traded on the New York Mercantile Exchange and Intercontinental Exchange Brent futures settled down for a second straight session Monday, pressured by renewed concern over global oil demand following the overnight release of bearish statistics showing a sharp slowdown in China trade in December.

China's exports tumbled 4.4% in December against year prior versus expectations for a 4.8% year-on-year gain, and imports slid 7.6% on an annualized basis while the market estimated an 8.0% increase.

The latest dataset follows a string of statistics showing a slowing Chinese economy, with a trade dispute with the United States exacerbating the slowdown. Midlevel U.S. and Chinese trade representatives met in Beijing last week, with both countries indicating progress was made in their discussions aimed at addressing U.S. complaints that China's trade practices are unfair. Senior trade officials are set to meet later this month.

Major equity indices are down late afternoon, although losses are restrained, with optimism still intact that the world's two largest economies will reach an agreement by March 1, when a 90-day truce reached in December between U.S. President Donald Trump and Chinese President Xi Jinping expires.

Reports note Trump has already made the necessary filings to increase tariffs from 10% to 25% on a wide range of Chinese imports for March 2 if a deal is not reached, with Beijing expected to retaliate. Such an escalation could transition the trade dispute into a protracted trade war with dire effects to global economies and oil demand.

Projections for global oil demand will be renewed this week in monthly outlooks from the Energy Information Administration on Tuesday, the Organization of the Petroleum Exporting Countries on Thursday and the International Energy Agency on Friday.

In December, the IEA projected global oil demand would register annualized growth of 1.4 million bpd this year, a quicker pace than the 1.3 million bpd year-on-year growth rate in 2018.

Oil traders will also glean data on Saudi Arabian oil production in December with Thursday's Monthly Oil Market Report from OPEC, with the Saudis pumping a record high of more than 11.0 million bpd in November.

In December, OPEC, Russia and nine non-OPEC oil producing nations agreed to 1.2 million bpd in production cuts for the first half of 2019, with the Saudis reportedly cutting their output in advance of the agreement's Jan. 1 effective date.

Over the weekend, Saudi Energy Minister Khalid al-Falih said he was confident the OPEC+ cuts would balance the market in 2019. Saudi crude exports would drop 800,000 bpd from November to 7.1 million bpd in February, the energy minister said last week.

Oil futures settled at four-day lows, with February West Texas Intermediate down $1.08 at $50.51 bbl, and ICE March Brent $1.49 lower at $58.99 bbl. NYMEX February ULSD futures settled down 2.72cts at $1.8525 gallon, and February RBOB futures ended down 3.69cts at $1.3638 gallon.

While traders have ongoing access to EIA data amid the partial government shutdown, they are blind to trader positions because of the shutdown of the Commodity Futures Trading Commission. It's unclear if speculators were re-engaging in the market in January after their exodus amid long liquidation in the fourth quarter.

Brian L. Milne can be reached at brian.milne@dtn.com

(CZ)

Brian Milne