Surging Oil Prices: Demand Swells as Chinese Data Outshines Predictions

by Adenike Adeodun

Oil values experienced an uptick on Friday, marking their path towards a third consecutive week of gains. This rise is buoyed by the surprisingly optimistic economic indicators from China and a record spike in oil consumption, reinforcing the notion of a persistent surge in demand from the world’s second-largest crude oil consumer.

As of 0249 GMT, Brent crude futures escalated by 62 cents, seeing a 0.7% increase, settling at $94.32. In parallel, U.S. West Texas Intermediate crude (WTI) witnessed a jump of 71 cents, or 0.8%, stopping at $90.87. This upward trajectory indicates that these standards have increased by approximately 4% compared to the previous week.

August brought refreshing news for China. The nation observed a more brisk expansion rate in industrial output and retail sales than previously forecasted. This indicates a stabilizing recovery trajectory for this global economic giant in the aftermath of the challenges posed by the COVID-19 pandemic.

Further intensifying the positive economic atmosphere, Friday’s data disclosure from China’s National Bureau revealed an astonishing rise in oil refinery processing. Clocking in at a record-setting 64.69 million metric tonnes in August marked a 19.6% leap from last year’s month, equivalent to a robust 15.23 million barrels per day (bpd).

This surge in refining throughput emerges as Chinese processors maintain high run rates. The objective is to cater to the heightened summer travel demands and exploit the burgeoning margins while exporting to avid Asian consumers.

According to a report by Reuters, Edward Moya, a seasoned analyst at OANDA, commented on the evolving market dynamics. “The current sentiment on Wall Street seems to favor oil. The unanimous belief is that the resolution by OPEC+ (the coalition of oil-producing nations) from the previous month will ensure the oil market remains taut during the upcoming fourth quarter.”

However, it’s more than just demand that’s drawing attention. Supply-side concerns are increasingly coming to the fore. With significant oil giants like Russia and Saudi Arabia tightening their belts on output, apprehensions about supply adequacy are on the rise. This has steered Brent and WTI to scales not witnessed since last November.

In a recent proclamation, the International Energy Agency forecasted that the prolonged oil production curbs by Saudi Arabia and Russia will likely create a market deficit persisting through the tail end of the year.

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