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Crude Futures Reach One-Month High on China's Strong Economic Growth

Strategic Insights

— 2 min read

China's robust industrial production, which surged 13.9% in August, has boosted the outlook for future oil demand, driving crude futures to a one-month high. The continued shutdown of a major pipeline carrying Canadian crude to U.S. refiners also supported prices, despite robust stockpiles reducing the likelihood of a supply crunch. Markets worldwide rose after global banking regulators announced new rules at the conclusion of talks in Basel, Switzerland, giving banks a longer window than expected to comply with stricter lending limits.

Key Takeaways:

  • Crude futures ended at a one-month high, with light, sweet crude for October delivery settling up 74 cents, or 1%, at $77.19 a barrel on the New York Mercantile Exchange.
  • China's August industrial production grew by 13.9% from a year earlier, surpassing expectations for the economy that is expected to provide a major portion of new demand for commodities in the coming months.
  • Markets worldwide rose after global banking regulators announced new rules, which removed some uncertainty in the marketplace, leading to a boost in stocks and oil prices.
  • The shutdown of the Enbridge Energy Partners pipeline carrying 670,000 barrels a day of oil to the U.S. provided lingering support for oil prices.
  • U.S. oil and fuel inventories are at their highest point since the early 1980s, with analysts predicting a 2.6-million-barrel drop in oil inventories in the week ended Sept. 10.
  • Refinery utilization is expected to drop 0.6 percentage point to 87.6% of capacity, leading to a sustained draw on U.S. inventories, which will be a required catalyst for oil prices to move higher on a sustainable basis.

Statistics:

  • Crude futures rose by 1% to settle at $77.19 a barrel.
  • China's industrial production grew 13.9% in August.
  • U.S. oil and fuel inventories are at their highest point since the early 1980s.
  • Analysts predict a 2.6-million-barrel drop in oil inventories in the week ended Sept. 10.
  • Refinery utilization is expected to drop 0.6 percentage point to 87.6% of capacity.
  • October reformulated gasoline blendstock (RBOB) settled 0.75 cent, or 0.4%, higher at $1.9806 a gallon.
  • October heating oil settled 1.83 cents, or 0.9%, higher at $2.1227 a gallon.

Sources:

  • Dow Jones Commodities News via Comtex, "Crude futures rise as China's growth boosts demand outlook"
  • Phil Flynn, analyst with PFGBest in Chicago, as quoted in the article.
  • Goldman Sachs Group Inc., analysts, as quoted in the article.
  • Brian Baskin, Dow Jones Newswires, "Crude futures rise as China's growth boosts demand outlook"

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