Oil Price Dips But Pared Losses Along With US Crude Over Projections On China’s Economic Stimulus
The price of oil in the market had almost fully recovered after taking a deep plunge on Monday, paring losses with US crude prices as investors look on the possibility for China's economic stimulus moves could bolster the world's second largest economy and its demand for fossil fuel.
Global benchmark Brent crude came tumbling down below the $83 per barrel mark early in this week's session following the decision from China's central bank on Sunday to slash lenders' reserve requirements, which is a clear signal from Beijing and its intensifying efforts to accelerate the country's economic growth.
Market analyst at Price Futures Group in Chicago, Phil Flynn, told CNBC that interest rate reduction is indicative of China's increasing oil consumption. According to Flynn, China, which remains cool and collected in the midst of a difficult situation, is clearly winning in this scenario.
Meanwhile, John Kilduff of Again Capital Management New York told Reuters that China's reaction on the slowdown is a healing salve in a market that is already feverish in rising oil prices.
Brent crude LCOc1, for instance, dipped significantly to $82.66 at the beginning of the session and settled at $83.91 per barrel, which is 25 cents lower than the previous price.
Just last week, the benchmark has seen a four-year high spike of $86.74 last week. The US Crude CLc1, on the other hand, started off low with $73.07 but ended the day at $74.29 per barrel.
China's Increasing Oil Demand
China's demand for crude and crude products rose significantly by 5.9 percent year on year to 28.41 million mt in August, a report from global said, citing the latest data from the National Development and Reform Commission.
The growth factors include the country's peaking gasoline consumption which by itself, has risen to 9.5 percent on year, with the gasoil demand following closely at 2.7 percent of the same period, the NDRC report said.
The hotter temperatures around the country call for car air conditioning which, as stated by the market sources, inevitably resulted in a continuously higher demand for gasoline.
As pointed out by the industry-focused publication, China's August oil product consumption climbed up by 3.2 percent from the previous month, which is the second month in a row where month-on-month growth has been seen.
On its own turf, China was able to process close to 50 million mt of crude oil in August, which is slightly higher than last year's output, the NDRC data revealed. This is somehow indicative that the Asian country requires more light crude oil throughout the year.