Brent declines on demand growth concerns from China

The front-month ICE Brent contract has moved $0.73/bbl lower on the day from Friday, to trade at $70.99/bbl at 09.00 GMT.

PHOTO: Oil pump jacks with the Chinese flag in the background. Getty Images

Upward pressure:

Brent’s price felt some upward pressure following massive shelling between Russia and Ukraine over the weekend, according to media reports.

In a significant escalation of the eastern European conflict, Russia launched one of the biggest airstrikes on Ukraine in three months, causing massive damage to the country’s power system on Sunday, Reuters reported. Meanwhile, Washington reversed its conflict policy after US President Joe Biden allowed Kyiv to use US-made weapons to strike into Moscow, the report added.

Further escalation of the Ukraine-Russia conflict can disrupt Russia’s energy infrastructure and put upward pressure on Brent's price, according to oil market analysts.

Brent futures gained some support after Ukraine and Russia “further ratcheted up drone and missile attacks against each other over the weekend,” VANDA Insights’ founder and analyst Vandana Hari said.

Downward pressure:

The latest oil consumption data from China has highlighted concerns about the country’s slow oil demand growth and pushed Brent’s price lower.

The country’s oil consumption in October plunged by 5.4% on the month, with refiners processing about 59.54 million mt of crude oil last month, according to data from the National Bureau of Statistics (NBS).

The fresh data from China “weighed on [oil] sentiment,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

The news has reminded the market of China’s weak economic health, despite Beijing’s latest stimulus packages. “This isn't just a blip—it's a red flag,” SPI Asset Management's managing partner Stephen Innes said, stating that China’s oil demand growth looks dismal.

Oil market reports from OPEC and the International Energy Agency (IEA) also disappointed investors as both agencies lowered their demand growth projections for 2024.

“Crude prices continued to be weighed down by China demand concerns… after both OPEC and the IEA lowered their demand forecasts,” analysts from Saxo Bank said.

By Aparupa Mazumder

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