By Myra P. Saefong and William Watts
Oil futures fell on Wednesday, with the U.S. benchmark slipping below a nearly seven-year high to post a loss for the first time in five sessions, pressured by concerns over the outlook for global economic growth, as well as oil demand from China.
Oil prices moved lower after Chinese customs data showed crude oil imports slumping 5% month-on-month in September, marking a 15% decline year-on-year , Troy Vincent, market analyst at DTN, told MarketWatch.
“Traders and investors are increasingly seeing evidence of the risk posed to the global economy as a result of higher energy prices,” he said. “Inflation, and particularly the impact of higher energy prices on industrial and manufacturing activity, is one of the key reasons global GDP growth expectations for 2021 and 2022 are being cut.”
West Texas Intermediate crude for November delivery /zigman2/quotes/209723049/delayed CL00 +4.68% fell 20 cents, or nearly 0.3%, to settle at $80.44 a barrel on the New York Mercantile Exchange after tapping a low of $79.42. WTI finished Tuesday at its highest since Oct. 30, 2014, up a fourth straight session.
December Brent crude , the global benchmark, declined by 24 cents, or 0.3%, to $83.18 a barrel on ICE Futures Europe. Brent lost ground Tuesday, with analysts attributing weakness, in part, to the International Monetary Fund’s cut to its global growth outlook.
Oil futures remain “in a well-defined uptrend right now with WTI futures sitting comfortably above the $80/barrel mark, near multiyear highs,” said analysts at Sevens Report Research, in Wednesday’s newsletter. “But the recent gains have occurred very quickly and some consolidation here around the $80 level in WTI should not come as a surprise.”
In a monthly report Wednesday, OPEC left its forecast for 2022 growth in oil demand unchanged from its September projection at 4.2 million barrels a day , with global demand expected to average 100.8 million barrels a day.
OPEC modestly trimmed its forecast for 2021 demand growth to 5.8 million barrels a day, down from its previous projection of 5.96 million barrels a day. That’s due largely to lower-than-expected actual data for the first three quarters of the year and despite healthy demand assumptions about the current quarter, which is expected to be supported by a seasonal uptick in petrochemical and heating fuel demand as well as switching from natural gas to petroleum products due to high gas prices.
Carsten Fritsch, analyst at Commerzbank, pointed out in a note China imported just shy of 10 million barrels a day of crude in September. That was 500,000 barrels a day less than seen in August, while natural-gas imports rose to 10.62 million tones, their highest since January, and coal imports hit 32.9 million tons, the highest this year.
The American Petroleum Institute, a trade group, will release its data late Wednesday on U.S. petroleum supplies for the week ended Oct. 8, with the official figures from the Energy Information Administration due out Thursday morning. The reports are delayed by a day this week due to Monday’s Columbus Day holiday.
On average, analysts expect the EIA to report a fall of 500,000 barrels in domestic crude inventories for the week ended Oct. 8, according to a survey conducted by S&P Global Platts. They also forecast supply declines of 400,000 barrels for gasoline and 800,000 barrels for distillates.
On Nymex Wednesday, November gasoline tacked on almost 1% to $2.406 a gallon, while November heating oil rose 0.4% to $2.521 a gallon. Both marked fresh settlements at their highest since October 2014.
Natural-gas futures moved up, with the November contract adding 1.5% to $5.59 per million British thermal units.
In an interview with CNBC, Russian President Vladimir Putin rejected the idea that his country had been withholding any natural-gas supplies in Europe. He also said any extra supplies beyond what is contracted would be a “question of negotiations with Gazprom,” a Russian majority state-owned energy firm.
On Wednesday, a monthly report from the Energy Information Administration revealed expectations for a 30% increase in average heating bills for U.S. households that primarily use natural gas to heat their homes. The EIA also expects domestic households using heating oil to spend 43% more and households using propane to pay 54% more this winter.
DTN’s Vincent said he expects to see “continued volatility in oil and [natural] gas prices as we work into winter.” The supply and demand balance over the coming months will “largely be dictated by winter weather developments on the one hand, and the destruction of demand due to high prices on the other,” he said.