Oil falls 1% as mixed China trade data offset supply cuts

Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. REUTERS/Nick Oxford/File photo

Oil prices slipped by 1 percent on Tuesday, erasing most of Monday’s gains, as mixed economic data from the world’s second largest oil consumer China and winter demand worries offset the impact of Saudi Arabia and Russia extending output cuts.

Brent crude futures slipped 92 cents, or 1.08 percent, to $84.26 a barrel by 0714 GMT, recovering slightly after a $1 drop earlier, while U.S. West Texas Intermediate crude was at $79.95 a barrel, down 87 cents, or 1.08 percent.

Both benchmarks gained about 30 cents on Monday after top exporters Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year.

While China’s crude oil imports showed robust growth both year on year and month on month in October, the country’s total exports still contracted at a quicker pace than expected, reflecting weak global demand.

READ: China’s imports unexpectedly grew in Oct, exports extended decline

“China’s export data could be seen to be worse than expected, but domestic demand may be picking up,” said CMC Markets’ Shanghai-based analyst Leon Li.

Expectations of crude run reductions by China-based refiners between November and December may limit oil demand and exacerbate price declines.

Concerns that a warmer-than-expected winter could curb energy and fuel demand weighed on prices as well.

“This year’s winter in the northern hemisphere is relatively warm, which has reduced fuel consumption to a certain extent,” said CMC Markets’ Li.

Looking ahead on the supply side, markets are waiting to see how long Saudi Arabia and Russia are ready to rein in production.

Taking into account the weak global demand, OPEC+ is unlikely to be in a hurry to reverse oil production cuts when is joint ministerial monitoring committee meets on Nov. 26, OANDA’s senior market analyst Kelvin Wong said.

READ: OPEC+ maintains output reduction to boost oil prices

“What will be of more interest to the market is whether they will extend these cuts into early 2024 or start to bring this output back. We should get clarity on this sometime in early December,” ING analysts added.

Saudi Arabia confirmed on Sunday it would continue with its additional voluntary cut of 1 million barrels per day (bpd) translating into production of about 9 million bpd for December, a source at the ministry of energy said in a statement.

Moscow also announced it would continue its additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.