Oil Prices Fall Amid China's Slowing Demand and OPEC's Decision

Oil prices declined on Monday after China reported a drop in its oil imports, and investors turned their attention to the June 30 deadline for the Iran nuclear deal, which could lead to the lifting of Western sanctions and increase Iranian oil supply. The Organization of the Petroleum Exporting Countries (OPEC) decision to keep its production level unchanged last week also contributed to the decline. On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $58.54 a barrel, down $0.59 in the Globex electronic session.

Key Takeaways:

• Oil prices fell due to China's 11% year-over-year drop in May crude-oil imports, which weighed on the market and offset signs of a decline in U.S. shale oil production.
• OPEC's decision to maintain its production level unchanged for the second time in six months has also contributed to the bearishness in the market.
• The potential nuclear deal between Iran and six world powers, set to expire on June 30, could lead to the lifting of Western sanctions and increase Iranian oil supply, putting pressure on global oil prices.
• Strong Chinese oil demand has been one of the few pillars of oil support so far this year, and signs of softening demand will weigh on oil prices.
• Alastair Newton, a senior political analyst at Nomura International, believes there is a 70% probability of the nuclear deal being reached by June 30, which could allow Iran to sell an additional 0.5 million barrels a day of oil on global markets.
• Morgan Stanley's Adam Longson warns of worrisome signs of stress in the physical oil market, particularly in the Atlantic Basin, and notes that high refinery margins seem unsustainable.

Statistics:

• China's May crude-oil imports fell 11% from a year earlier to 23.24 million tons.
• Iran's potential oil export increase: 0.5 million barrels a day.
• Global oil demand: 4% ahead of day-to-day demand for oil.
• OPEC's production level unchanged for the second time in six months.
• West Africa and North Sea crude oil cargos: unsold.
• Middle East crude market: temporary strength.
• Global Data Point: 2015.

Sources:

• Alastair Newton, senior political analyst at Nomura International, as reported by press on June 2015.
• Adam Longson, Morgan Stanley analyst, cited in the same article.
• Oil prices quoted on the New York Mercantile Exchange and the International Continental Exchange (ICE).
• China's oil imports data for May 2015.