As the oil market ended the week with prices lower by 3 percent, the world looks to the Chinese economy for signs of underlying problems, being the second largest oil consumer in the world. (Photo : Twitter)
As the oil market ended the week with prices lower by 3 percent, the world looks to the Chinese economy for signs of underlying problems, being the second largest oil consumer in the world. This is despite the performance of Chinese crude imports last December, which was recorded at 8.6 million barrels per day.
Brent and U.S. West Texas Intermediate crude futures both suffered a three percent decreased. The former closed the week with oil prices at $55.45, while the latter fell to $52.37, according to an article by news.com.au.
"China right now seems more interested in keeping capital in the country than focusing on growth overall," said Phil Flynn, analyst at Chicago-based Price Futures Group, in an interview with Reuters.
"We have to watch this situation develop because this is one threat to what is otherwise wildly bullish scenario for oil in the coming year."
Production Cuts Lead to Supply Issue
Meanwhile, Saudi Arabia continues to support the market supplies despite lower production levels. Compared to recorded figures in February 2015, Saudi Arabia was only able to produce results of below 10 million barrels per day. The top oil producer expects lesser output on the following weeks due to deeper cuts.
According to the Organization of the Petroleum Exporting Countries (OPEC), however, there has been no evidence of export reductions since the year started.
"Compliance won't be 100 percent; it never is," said an OPEC source to Reuters. Based on past compliance levels, an overall compliance rate of 50 to 60 percent would suffice.
Libya has stepped up its oil production efforts, producing up to 750,000 barrels per day.
"I think the bigger issues for oil are less about demand right now and a lot more about the supply condition," said Rob Haworth, a senior investment strategist in Seattle-based U.S. Bank Wealth Management.
"EIA data and our government policies have to leave you thinking that a U.S. production response may unwind all the production cuts Saudi Arabia and others are planning," Haworth told Reuters.
