‘Glut concerns’ mean oil price dips but strong China imports add support

Henning Gloystein

Oil prices dipped today on persistent worries about oversupply, but strong Chinese imports and signs that US storage tanks are gradually being drained offered some support to prices.

Brent crude futures were at US$47.70 per barrel at 7am UK time, down 4 cents from their last close.

West Texas Intermediate crude futures were down 3 cents at US$45.46 per barrel.

The dips came after the International Energy Agency's chief economist, Laszlo Varro, said that oil markets were still oversupplied.

"There is no doubt in the short term the market is oversupplied," Varro told Reuters news agency in Tokyo, adding that this was in part due to rising output from Kazakhstan's giant Kashagan oil field.

The Organization of the Petroleum Exporting Countries (OPEC) said late on last night that the world would need 32.20 million barrels per day of crude from its members next year, down 60,000bpd from this year, as consumers have increasing choices of supply from outside OPEC.

Meanwhile, OPEC said its output rose by 393,000bpd in June to 32.611 million bpd. The gain was led by Nigeria and Libya.

That came despite a pledge by OPEC to curb production by about 1.2 million bpd between January this year and March 2018, while Russia and other non-OPEC producers say they will hold back half as much.

Demand still there

Despite the ongoing supply overhang, there are signs of a gradual reduction in the global glut.

China imported 212 million tonnes of crude oil, or 8.55 million bpd, in the first six months of the year, up 13.8% on the same period in 2016, according to customs data seen today.

This makes China the world's biggest crude importer, ahead of the United States.

"We are definitely seeing robust demand growth (in China), driven by low oil prices and growth in SUVs. The very strong import growth is partly being helped by declining domestic production," said Neil Beveridge, senior oil analyst Sanford C. Bernstein.

In the United States, crude oil inventories last week dropped the most in 10 months.