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Petroleum industry

Oil Prices Slip Amid Concerns Over China's Demand

Strategic Insights

— 2 min read

Chinese central bank's interest rate hike sent oil prices tumbling as concerns over slowing economic growth and oil demand in the world's second-largest oil consumer mounted. The benchmark interest rate increase was the country's latest bid to temper inflation, causing market watchers to reassess oil demand prospects. Despite concerns, analysts believe that supply-side issues remain a more significant factor in shaping oil prices.

Key Takeaways:

  • Oil futures fell $108.09 a barrel on the New York Mercantile Exchange after China's central bank raised interest rates.
  • Brent crude on the ICE futures exchange added 10 cents, or 0.1%, to $121.16 a barrel due to reports of lower production in the North Sea.
  • China's economy is closely watched in the oil market because the modernizing country is expected to contribute a large portion of global oil demand in the coming years.
  • China's oil consumption is projected to reach almost 9.6 million barrels a day in 2011, representing about 37% of projected world oil demand (U.S. Energy Information Administration).
  • Production concerns in the North Sea continue to support Brent crude prices, outweighing the impact of China's interest rate hike (Andy Lebow).
  • Libyan oil exports, cut off by the civil war, remain uncertain with the first oil tanker chartered by Vitol Group scheduled to dock on Tuesday.
  • Analysts expect a rise in crude inventories, a drop in gasoline stocks, and a decrease in distillates supplies in the upcoming surveys (Dow Jones Newswires).
  • U.S. crude supplies are expected to show a 1.6 million barrel increase, with gasoline stocks falling 1.8 million barrels and distillates supplies dropping 400,000 barrels (American Petroleum Institute survey).
  • Refinery utilization is seen climbing 0.6 percentage point to 84.7% of capacity.

Statistics:

  • Crude oil futures down 38 cents, or 0.4%, to $108.09 a barrel on the New York Mercantile Exchange.
  • Brent crude on the ICE futures exchange added 10 cents, or 0.1%, to $121.16 a barrel.
  • China's oil consumption projected to reach almost 9.6 million barrels a day in 2011.
  • Production concerns in the North Sea supporting Brent crude prices.
  • Expect a rise in crude inventories of 1.6 million barrels.
  • Gasoline stocks expected to fall 1.8 million barrels.
  • Distillates supplies expected to drop 400,000 barrels.
  • Refinery utilization expected to climb 0.6 percentage point to 84.7% of capacity.

Sources:

  • Dow Jones Commodities News via Comtex, April 05, 2011.
  • Andy Lebow, senior vice president at brokerage MF Global.
  • U.S. Energy Information Administration.
  • JBC Energy, Vienna.
  • Dow Jones Newswires, April 05, 2011.
  • Dan Strumpf, Dow Jones Newswires, 212-416-2818.

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