The Brent oil price experienced a significant drop to a monthly low of USD 83.5 per barrel this week due to weak Chinese data. This volatility in the market was closely followed by a recovery, as noted by Commerzbank’s commodity strategist Carsten Fritsch.
Despite the initial fall in prices, the time spreads of the Brent forward curve actually widened over the course of the week. This widening indicates a need for a price premium to be paid for oil available at short notice, reflecting a tight oil market situation.
The weekly inventory data from the American Petroleum Institute and the US Department of Energy further confirmed the tight oil market conditions. US crude oil inventories unexpectedly dropped by 4.9 million barrels in the last reporting week, marking the third consecutive weekly decline. While the API had reported a decline of 4.4 million barrels in crude oil stocks, gasoline and middle distillates saw surprising stock builds of 3.3 million and 3.5 million barrels respectively.
Net crude oil imports increased slightly compared to the previous week, while crude oil processing slightly decreased but still remained at a high level of nearly 17 million barrels per day. However, the most notable point was the sharp decline in gasoline demand, which fell by approximately 600 thousand barrels per day compared to the previous week, totaling less than 8.8 million barrels per day.
Overall, the impact of weak Chinese data on Brent oil prices has revealed the ongoing market volatility and the delicate balance between supply and demand. As global economic conditions continue to fluctuate, it is crucial for investors and traders to closely monitor market indicators and adapt to the changing landscape of the oil industry.