Oil futures: Crude consolidates weekly gains on China optimism
Quantum Commodity Intelligence – Crude oil futures Friday were were higher as markets consolidated weekly gains with optimism over China, at least for now, offsetting growing concerns over a slowdown in the West.
Aug23 ICE Brent futures were trading at $76.67/b (1905 GMT), compared to Thursday's settle of $75.67/b and last Friday's $74.79/b. The front spread at one point tipped into a narrow contango structure before Aug23/Sep23 returned to around parity.
At the same time Jul23 NYMEX WTI was trading $71.85/b, versus Thursday's close of $70.62/b and last week's close of $70.17/b.
Support this week in terms of positive news for oil came largely from China in the form of both direct oil indicators and broader financial stimulus.
Beijing issued refiners with a third batch of crude oil import quotas, taking the total so far in 2023 to 194 million tonnes, which is some 20% above the same time last year.
Latest government data also revealed refining throughputs were up 15% on the year during May, although marginally lower on the month on a barrel-per-day basis.
The chief executive of Kuwait's national oil company sees demand from its largest customers – including China – rising through the rest of 2023.
"I see oil demand continuing to rise. We see it from our customers in China - our largest customers for crude. They continue to demand at least similar vols of crude, if not more," Sheikh Nawaf al-Sabah said.
In addition, China has trimmed interest rates this week and injected billions of dollars via liquidity tools.
“The data and a series of interest rate cuts in China this week have helped to calm concerns over the stalling post-pandemic recovery in China, the world’s largest oil importer. Just this week, both retail sales and industrial output data disappointed," said City Index analyst Fiona Cincotta.
Doubts
However, there are still nagging doubts over the strength of China's economy, with sluggish growth and stimulus only limited so far.
"China's post-COVID rebound has now fully matured as the latest batch of activity data reinforced a slowdown is under way across the Chinese economy. As a result, we have revised our 2023 GDP forecast lower," Wells Fargo bank said in a client note, adding it now believes China's economy will grow 5.7% this year.
The US bank said further easing is imminent as authorities are likely to lower China's bank Reserve Requirement Ratios in Q3-2023.
Oil prices have also been given a lift this week by soaring natural gas prices, with benchmark European TTF natural gas prices almost doubling since the start of the month before falling back.
