Crude oil prices retreated from Monday’s gains amid weak demand outlooks, following disappointing Chinese international trade data for November.
Crude oil prices slid following disappointing China’s international trade data in the Asian session on Tuesday.
At 6 am CET, Brent futures were down 0.37% to $71.9 per barrel, and the WTI futures slipped 0.45% to $68.06 per barrel. The swift downturn in oil prices highlighted an ongoing weak demand outlook for the traditional energy markets, driven by the global economic slowdown, particularly in China.
China’s exports rose 6.7% and imports fell 3.9% from a year ago in November, both of which were significantly lower than economists’ estimated 8.7% and a rise of 0.9%. On Monday, China also reported a weaker-than-expected consumer price index (CPI), underlining the ongoing sluggish domestic demands.
China’s demands play a vital role in crude markets
Crude oil prices rose more than 1% rally on Monday amid China’s pledge to adopt more accommodative fiscal and monetary policies to aid the economy in 2025.
The top officials said China would “implement a more proactive fiscal policy and a moderately loose monetary policy” at the Political Bureau meeting of the CPC Central Committee. The statement signalled Beijing would impose more aggressive stimulus measures, such as raising the fiscal deficit, lowering the interest rates, and increasing government borrowings to shore up its economic growth in the new year.
As the world’s biggest oil importer, China’s demand outlook has a direct influence on the crude markets. According to LSEG estimates, China’s oil imports averaged 10.94m barrels per day (bpd) in the first 10 months of the year, a 3.7% decline from the same period last year. However, November’s imports reached a four-month high of 11.62m bpd.
On a positive note, a report from S&P Global projected that China’s oil demand may increase by 1.7% to 17.59 million barrels per day (bpd) in 2025.
This improved outlook likely reflects Beijing’s ongoing stimulus measures, announced in September with sweeping easing policies to support its faltering economic recovery. However, analysts from Commodity Insights caution that rising production in the United States and Canada, along with output increases by OPEC+, may balance supply and demand, mitigating any price impact from increased demand.
Last week OPEC+ postponed its plan to unwind the joint output cuts last week amid a slowdown in global demand and rising US production. The organisation, supplying about half of the world’s oil, decided to delay hiking its production by three months and a full recovery in output by a whole year until the end of 2026.
“Ultimately, the market will be focused on demand side factors given that OPEC has tried to tweak the supply side to boost prices, so far to no avail. The marginal driver of future demand will be China. So, for oil to continue to rally, we need steady, good news about the Chinese economy,” said Kyle Rodda, a senior market analyst at Capital.com.
Middle East tensions
The only bullish factor for the oil markets is intensifying geopolitical tensions in the Middle East.
Over the weekend, Syrian rebels toppled the government and ousted President Bashar al-Assad. The event, combined with escalating military conflicts between Iran and Israel, as well as the war in Ukraine, altogether increased uncertainties in the region.
In late November, crude prices rose more than 9% during the week due to a major war escalation between Ukraine and Russia.
Ukraine launched US-made longer-range missiles targeting a military base inside Russian territory, promoting Russia to lower its doctrine to use nuclear weapons. Russia also fired a hypersonic missile at Ukraine, marking a major escalation in the geopolitical tensions between the West and Russia. However, the price surge was short-lived amid ceasefire talks in the Middle East.
Meanwhile, US President-elect Donald Trump pushed Russia to reach an immediate truce with Ukraine.
