The Unforeseen Consequences Of China's Insatiable Oil Demand

The Unforeseen Consequences Of China's Insatiable Oil Demand

Beijing has put United States energy products, including crude oil and refined products, on lists of goods it will hit with a 25 per cent import tax in retaliation for similar moves by Washington.

Brent crude, the global oil benchmark, traded at less than $72 a barrel last night as the sell-off was compounded by data from the US Energy Information Administration showing stockpiles had fallen less than expected.

Furthermore, oil prices were dragged down by the increasing output of the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation.

The market has become volatile as concerns over political threats to supplies, such...

For the past week, crude imports averaged 7.9 million barrels a day, up by 182,000 compared with the previous week. However, they were still among the lowest this year because of a drop-off in demand from the country's smaller independent, so-called "teapot" refineries. "Iran sanctions will take another 1 million bpd off the markets", warning that this would leave markets with little spare capacity to deal with unforseen disruptions.

Prices of the barrel of the American reference for the sweet light crude oil are falling further today, breaking below the $68.00 mark per barrel. China's government said it will place tariffs on USA goods including cars, crude oil and scrap metal starting on the same date.

Spot Brent crude oil futures were at $73.42 per barrel at 0653 GMT on Monday, up 21 cents, or 0.3 percent, from their last close.

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Iranian crude oil loadings to China and India increased significantly in July compared to the previous month despite US threats, a Platts survey showed. The sanctions did not include Iran's oil exports.

Oil prices steadied on Wednesday despite relatively weak Chinese import data as the market was still supported by falling U.S. crude inventories and the introduction of sanctions against Iran.

"The ability of gasoline to hang in there despite strong demand weighed on the market", said John Kilduff, a partner at Again Capital Management in NY. In addition, Libya reopened some of the closed oil ports, which raised the market expectations of the growth of oil supplies.

Many countries, including U.S. allies in Europe as well as China and India oppose the sanctions, but the United States government said it wants as many countries as possible to stop buying Iranian oil.

Analysts expect the USA sanctions to take between 500,000 bpd and 1 million bpd of Iranian crude oil off the market when full sanctions return in early November, and some experts think that the figure will be closer to 1 million bpd.

Prior to this deal, International Olympic Committee had struck deals for importing 10 million barrels from six cargoes in the spot market.

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