Oil prices dipped on Tuesday as sluggish demand from China countered supply disruptions caused by Tropical Storm Francine, alongside ongoing concerns about global oversupply affecting the market.
Brent crude futures fell by 4 cents, or 0.06 percent, settling at $72.80 a barrel as of 03:34 GMT. Meanwhile, U.S. West Texas Intermediate crude futures decreased by 10 cents, or 0.15 percent, to $68.60 a barrel. Both benchmarks had seen an increase of approximately 1 percent at Monday’s close.
Impact of tropical storm Francine
The U.S. Coast Guard ordered the suspension of all activities at Brownsville and several smaller Texas ports on Monday evening as Tropical Storm Francine moved through the Gulf. The Corpus Christi port remained operational but under restrictions.
The storm is predicted to intensify significantly over the coming days, with expectations of it developing into a hurricane by Monday night or Tuesday morning, according to the National Hurricane Center (NHC).
Production shutdowns
Exxon Mobil announced it had halted production at its Hoover offshore platform, while Shell suspended drilling at two of its sites. Chevron also began to shut down operations at two offshore platforms. Analysts from ANZ noted that “at least 125,000 barrels per day (bpd) of oil capacity is at risk of being disrupted,” referencing data from the NHC.
Global demand concerns
However, the market continued to be pressured by signs of declining global demand and the prospect of sustained oil oversupply. Data released on Monday indicated that China’s consumer inflation rose in August at its fastest rate in six months, yet domestic demand remained weak, with worsening producer price deflation.
Global commodity traders Gunvor and Trafigura suggested that oil prices could stabilize between $60 and $70 per barrel due to reduced demand from China and persistent global oversupply, as discussed by executives at the Asia Pacific Petroleum Conference (APPEC) on Monday.
China’s economic shift
Some analysts noted that China’s transition toward lower-carbon fuels and a sluggish economy are curbing oil demand growth in the world’s largest crude importer, Reuters reported. According to Daan Struyven, head of oil research at Goldman Sachs, annual demand growth in China has declined from approximately 500,000-600,000 bpd in the five years preceding the COVID-19 pandemic to just 200,000 bpd currently.
Upcoming reports
On Tuesday, market participants will be closely monitoring the monthly oil market report from the Organization of the Petroleum Exporting Countries (OPEC). Additionally, the U.S. Energy Information Administration is expected to release its short-term energy outlook, which will include projections regarding the global market and U.S. crude oil production.
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