U.S. West Texas Intermediate crude oil futures are trading lower on Friday, with prices headed for their biggest weekly decline since June, amid weak demand and ample fuel supplies.
After hovering near five-month highs throughout August on the hope of a robust recovery in the economy, prices began to collapse at mid-week following a report that the volume of crude arriving in China was set to slow in September and after U.S. government data showed a steep drop in gasoline demand.
End of China’s Crude Oil Buying Splurge May Dent Demand Optimism
Refinitiv said August-loading barrels destined for China were 7.93 million bpd, down from 8.2 million bpd in July and well down from the second quarter average of 11.87 million bpd.
What the new data seems to be showing is that the crude oil that has been flooding into China in recent months will probably ease back to more normal levels from October onwards.
While this still means imports of likely above 10 million bpd, it does mean the crude market is going to lose as much as 2 million bpd of demand that it had been getting used to.
Why is this going to happen? Because earlier in the year when oil prices were falling to 22-year lows, Chinese refiners took advantage of their financial muscle to suck up available barrels across the globe. Now that its economy is sputtering like the rest of world, China isn’t interested in aggressively buying crude since it has ample supply.