Oil falls as concern grows over Chinese refinery demand
LONDON (Reuters) - Oil prices fell on Wednesday, following Chinese import data that highlighted an ongoing slowdown in demand from previously avid buyers, although evidence of falling U.S. crude inventories and the introduction of Iranian sanctions helped stem losses.
Front-month Brent crude oil futures LCOc1 were down 38 cents on the day at $74.27 a barrel by 1227 GMT, while U.S. crude futures CLc1 were down 67 cents at $68.50 a barrel.
China’s crude imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a drop-off in demand from the country’s smaller independent, or “teapot”, refineries.
Shipments into the world’s biggest importer of crude came in at 36.02 million tonnes last month, or 8.48 million barrels per day, rising from 8.18 million bpd a year earlier and just up on June’s 8.36 million bpd, customs data showed.
“Weaker Chinese import figures are putting pressure on prices ... It was above all subdued demand from smaller independent refineries that put on the brakes. They are battling with poorer margins due to government tax interventions and higher oil prices,” Commerzbank said in a note.
Singapore-based brokerage Phillip Futures said an escalating trade dispute between the United States and China has “unnerved investors on the prospect of lowered global oil demand growth”.
Markets remained supported by the introduction on Tuesday of new U.S. sanctions against Iran, which initially target Iran’s purchases of U.S. dollars - in which oil is traded - as well as metals trading, coal, industrial software and its auto sector.
From November, Washington will also target Iran’s petroleum sector.
Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries.
“We view that it is very unlikely that the U.S. administration will be successful in reducing Iranian exports to zero,” analysts at MUFG said in a note on Wednesday.
They said Iranian exports were likely to drop by up to 1 million bpd by November but even that could push Brent to $85 per barrel if oil markets were hit by other disruptions in producer countries such as Libya or Venezuela.
The market was also bolstered by a report on Tuesday from the American Petroleum Institute, which said crude inventories fell by 6 million barrels in the week to Aug. 3 to 407.2 million.
Official U.S. fuel storage data is due later on Wednesday from the Energy Information Administration.