Oil market turmoil: OPEC+ supply boost meets China's economic woes
Oil prices on the New York fuel exchange are extending losses due to signals that the OPEC+ cartel will increase crude supplies starting in October. Demand is also negatively impacted by signals from China’s economy, which is the largest importer of "black gold."
A barrel of West Texas Intermediate crude for October deliveries costs £62 (€1 ≈ £0.81) on NYMEX in New York, down by 0.65%, reported PAP Business on Monday morning. Meanwhile, Brent for next month on ICE is priced at £63 per barrel, down by 0.73%, after losing over 2% on Friday.
There are signals in the markets that OPEC and its allies - OPEC+, which includes Russia - are gradually increasing crude oil supplies by 29,000 cubic metres per day (1 barrel ≈ 159 litres) as part of restoring production, which was limited based on agreements from 2022.
At the moment, there are no signs that such actions by the Organization of the Petroleum Exporting Countries would be postponed - anonymous OPEC+ officials claim.
Will China spoil OPEC's plans, expanded by Russia?
The OPEC+ cartel is invested in high oil prices. Therefore, the organisation has stipulated that if necessary, it can halt the supply increase should crude prices "erode." This is a likely scenario, according to experts. The fragile Chinese economy, where there is no improvement despite many phases of economic stimulus, poses a threat to oil demand.
Official PMI data published on Saturday from Chinese industry showed that the PMI index fell to 49.1 points in August from 49.4 points in July, according to China’s National Bureau of Statistics. Analysts had forecasted 49.5 points.
This marks the fourth consecutive decline in this indicator. The crisis in China’s real estate sector is also deepening, raising concerns that the world's largest oil importer might struggle to achieve its GDP growth target this year.
"Concerns about demand in China will definitely not disappear anytime soon," comments Warren Patterson, head of commodity strategy at ING Groep NV.
