Oil falls on China economic data as Opec cuts support crude

London — Oil prices slipped on Friday after China reported slower economic growth, pointing to lower fuel demand in the world’s biggest oil importer, although market sentiment was supported by supply cuts agreed last week by major crude producers.

Benchmark Brent crude was down 40c at $61.05 a barrel by 8.20am GMT, on course for a decline this week of about 1%. US light crude was 25c lower at $52.33.

China, the world’s second-largest economy, reported on Friday some of its slowest growth in retail sales and industrial output in years, highlighting the risks of the country’s trade dispute with the US.

Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, though runs were 2.9% above levels a year earlier.

Concerned by mounting oversupply, oil cartel Opec and other oil producers, including Russia, agreed last week to reduce output by 1.2-million barrels per day (bpd), or more than 1% of global demand.

“For the time being, until the Opec cuts start kicking in, the market is oversupplied in the short term,” said Tony Nunan, oil risk manager at Mitsubishi. “If China is slowing down, that’s definitely a concern.”

The International Energy Agency (IEA) said on Thursday that it expects a deficit in oil supply to emerge by the second quarter of next year, provided Opec members and other key producers stick closely to last week’s deal to cut output.

“The Opec cuts will have a substantial impact on the first quarter of 2019 balances compared with this quarter, but market observers may need to wait for the cuts to percolate to inventory data,” Barclays analyst Michael Cohen said in a note.

As part of the agreement, de facto Opec leader Saudi Arabia plans to reduce its output to 10.2-million bpd in January.

The IEA kept its 2019 forecast for global oil demand growth at 1.4-million bpd, unchanged from its projection last month, and said it expected growth of 1.3-million bpd this year.

Said Cohen, “Our market balance looks 0.5-million bpd tighter next year on reduced Opec supply, such that the surplus is just 0.2-million bpd.” 

Reuters