Demand Uncertainty for 2025 Sparks Sell-Off in Oil Market
Oil prices are down almost 2% today, partly linked to yesterday's data on the state of the Chinese economy and November's oil processing figures. Yesterday's data revealed moderate growth in industrial production and very weak growth in retail sales. November's data from China also showed a persistently weak situation in fixed asset investment, which does not suggest an economic rebound in the coming months.
In addition, we received data on oil processing in China. In November, 58.51 million tonnes of oil were processed in China, the smallest monthly amount since June. This is equivalent to 14.3 million barrels per day (bpd), a level just 0.2% higher year-on-year (y/y). Although processing in private refineries has increased, it remains significantly below levels seen in the last five years. Furthermore, five large state-owned refineries underwent maintenance last month. Implied fuel demand in November fell by 2.1% y/y according to Bloomberg data, while in the 11 months of this year, demand is down 3.3% y/y, averaging 14 million bpd.
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Refinery runs in private Chinese refineries are significantly lower than 5-year range. Source: Bloomberg Finance LP
In response to the weak news from China and recent negative revisions to demand growth forecasts for next year (primarily by OPEC), crude oil is pulling back quite sharply. During the yesterday's session, the price of oil reached the highest levels since November 25, but now the price is falling below $70 per barrel and is testing the demand zone defined by the 25 and 50 SMAs (Simple Moving Averages).
Source: xStation5
