After being paralyzed by pandemic-induced circumstances, Brent crude hits its highest record in five months. The surge is brought by supply cuts in Abu Dhabi, which stands at 30% for October.
This is higher than the September slash, standing at a 5% cut imposed by the government. Global demand, on the other hand, remains far from reaching pre-COVID levels.
Brent crude price advanced instantaneously with the decision. Brent futures for November delivery hit the $46.50/barrel price mark. This translates to a 1.5% or 69-cent increase at the Intercontinental Exchange Europe.
In the New York Mercantile Exchange, West Texas Intermediate jumped 51 cents to $43.48/barrel. WTI futures are also trading higher at a 50-cent increase recahing $43.47.
Brent will close the month on a positive note, after recording its fifth successive monthly increase.
Similarly, the WTI records its fourth consecutive month of good trade. It hit its five-month high at the time when Hurricane Laura landed, at $43.78/barrel.
A combination of a sustained weak dollar and fast recovery in China’s services sector contributed to the gains.
However, analysts warn that demand remains lukewarm and supply ample, giving caution to another oversupply possibility.
China, the world’s largest importer, expects to reduce crude imports in the coming month. It houses an overwhelming inventory of crude stockpiles in its arsenal inside and outside the country.
Should this happen, it will be the first time in five months that crude imports of the country will fall. To iterate, these are mostly sourced from the United States, Russia, and Iraq.
China Looks West
Chinese imports of crude oil from the Middle East, particularly from the Kingdom of Saudi Arabia, slumped since early this month. This was due to supply cuts imposed by OPEC+ member states.
It declined by 23.4% to roughly 1.26 million bpd. For the record, Chinese imports of Arabian crude hit a record high in May to June period at 2.16 million barrels per day.
After turning its back from Saudi, China looked west and imported US West Texas Intermediate at roughly 864,000 barrels per day of imports from the United States.
Experts in the field note that as much as this is a bargain-hunting for the cheapest oil supplier, China’s increased oil imports from the United States are part of its fulfillment of Phase 1 of the US-China trade deal.
The agreement obligates the country to buy more energy products from the US.
This translates to a 139% year-on-year import increase, which places the United States in the fifth place among Chinese suppliers, led by Russia and followed by Iraq.
While the shift poses a significant dent on the leading oil exporter in the world, Saudi Aramco today discovers two new oil-gas fields in the northern part of the kingdom.
Aramco said that they would investigate the extent of the fields to calculate how much energy each location holds.
According to the company’s representative, should costs and volumes are sustainable, the discoveries will be imperative on Saudi’s gas targets, including supplying the west coast.
The new addition came at a time when supply outnumbers demand at a relatively wide gap. But this will come handy when crude oil price normalizes in the near future.