Crude oil futures moved sideways during mid-morning trade in Asia Monday, continuing to hold on to support from signs that supply may tighten while market participants digested news of China’s slowing economic growth. At 10:40 am Singapore time (0240 GMT), ICE March Brent crude futures was up 8 cents/b (0.13%) from Friday’s settle to $62.78/b, while the NYMEX February light sweet crude contract was 7 cents/b (0.13%) higher at $53.87/b.
“It is a battle between OPEC [and its allies] tightening production and a slowdown in global economy,” Mitsubishi Corp. senior adviser Tony Nunan said Monday. Preliminary data released early Monday by the National Bureau of Statistics showed that China’s gross domestic product growth in the fourth quarter of 2018 stood at 6.4%, a further contraction from the 6.5% posted in the third quarter of 2018. This brought China’s GDP growth down to 6.6% for the whole year of 2018, one of the slowest rates in more than 20 years.
According to the Economics & Development Research Institute, China’s GDP growth is expected to slow further to around 6.2% in 2019 due to trade tensions with Washington, uncertainties in international capital flows, weakening domestic investment amid tight credit controls, property market curbs and tighter infrastructure financing. The EDRI is the think tank of state-run Sinopec, the world’s largest refiner by capacity. The slowdown is in line with the World Bank’s projections in an ominously titled report called ‘Darkening Skies.’
Cautious sentiment in light of bearish China data has capped the recent rebound in crude prices, analysts said. “Though oil fundamentals have demonstrated for signals of rebalancing in the markets, persistent weakness in global economic conditions along with opportunistic US swing producers will elicit for headwinds on pricing levels in the longer term,” Benjamin Lu, investment analyst at Phillips Futures, said.