Oil dips as China posts slowest GDP growth in almost three decades

By Reuters On Oct 18, 2019

FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer

By Jane Chung

SEOUL (Reuters) – Oil prices fell on Friday after China, the world’s largest oil importer, recorded its weakest quarter of economic growth in nearly three decades, dragged down by a trade dispute with the United States.

Global benchmark Brent crude oil futures (LCOc1) fell by 34 cents, 0.6%, to $59.57 a barrel by 0350 GMT.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures were down by 12 cents, or 0.2%, to $53.81 per barrel.

In the third quarter, China’s economic growth slowed to 6% year-on-year, its weakest pace in27-1/2 years and below expectations, dogged by soft factory production amid ongoing trade tensions with United States and sluggish domestic demand.

Crude demand growth tends to closely follow economic growth.

The slowing economic growth superseded China’s record refinery throughput in the minds of investors, as analysts expect there is little the world’s second-largest oil user can do to stimulate its economy.

Refinery throughput in September rose 9.4% from a year earlier to 56.49 million tonnes, on increases from new refineries and as some independent refiners resumed operations after maintenance.

Although China’s third-quarter GDP growth was slightly below expectations, Michael McCarthy, chief market strategist at CMC Markets in Sydney, said it was not “a shock to traders and oil trading volumes are low,” as the weak data had been expected.

Adding to the downward pressure, U.S. crude oil stockpiles surged last week as refinery output dropped to a two-year low, while gasoline and distillate fuel inventories decreased, the Energy Information Administration said on Thursday.

“It’s a bit of tough time for markets because we have questions about supply and demand. Last night’s EIA data was a bit of surprise,” said McCarthy.

U.S. crude inventories increased by 9.3 million barrels in the week ended Oct.11, compared with analysts’ expectations for an increase of 2.9 million barrels.

Elsewhere, the joint technical committee monitoring a global deal to cut output between the Organization of the Petroleum Exporting Countries (OPEC) and partners, including Russia, found compliance with cuts for September stood at 236%, according to four OPEC sources.

“Concerns about softer growth in the demand for oil and doubts about OPEC’s ability to rebalance the market on the current production cut rate will be key drags on prices in the near term,” ANZ Research said in a note.

OPEC and its allies have agreed to limit their oil production by 1.2 million barrels per day (bpd) until March 2020.

OPEC lowered its 2019 global oil demand growth forecast to 0.98 million bpd, while leaving its 2020 demand growth estimate unchanged at 1.08 million bpd, according to OPEC’s latest monthly report.