SINGAPORE: Oil prices fell on Wednesday as Chinese crude imports slipped to their lowest level in a year, although traders said the overall market remains well supported on the back of OPEC-led supply cuts.
Brent futures LCOc1, the international benchmark for oil prices, were at $63.38 per barrel at 0617 GMT, down 31 cents, or 0.5 percent, although still not far off a near two-and-a-half year high of $64.65 a barrel reached earlier this week.
U.S. West Texas Intermediate (WTI) crude CLc1 was at $56.89 per barrel, down 31 cents, or 0.5 percent, from their last settlement, but also still not far off the $57.69 a barrel reached earlier this week – the highest since July 2015.
China’s October oil imports fell sharply from a near record-high of about 9 million barrels per day (bpd) in September to just 7.3 million bpd in October, data from the General Administration of Customs showed on Wednesday. That’s their lowest level since October 2016.
“Lower imports reflected less purchases from independent refineries as many of them are running out of crude quotas for this year,” said Li Yan, oil analyst with Zibo Longzhong Information Group.
For next year, however, independent refiners are likely to boost their imports again as authorities on Wednesday raised their 2018 crude oil import quota by 55 percent over 2017, to 2.85 million bpd.
Overall, oil markets remain well supported largely due to an ongoing effort lead by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold supplies in order to prop up prices.
With crude more than 40 percent up since June, oil-consuming industries are feeling the pinch.
“Oil is back up to $60 a barrel, and I think it is going to put downward pressure on airline profits and margins in the coming years,” said Brian Prentice, partner at aviation services firm Cavok.
Beyond fundamentals, traders were closely eyeing escalating tensions in the Middle East.
“Lebanese Prime Minister Saad Hariri’s resignation and a missile launch by pro-Iran Yemeni Houthis on Riyadh increase the risk of a regional conflict,” risk consultancy Eurasia Group said.
The resignation on Saturday of the Saudi-allied Lebanese prime minister, announced from Riyadh and blamed on Iran and Hezbollah, is seen by many as the first step in Saudi intervention in Lebanese politics.
Saudi air defense forces intercepted a ballistic missile fired towards Riyadh on Sunday. Saudi Arabia accuses arch-foe Iran of supplying missiles to Houthi militia in Yemen. Iran denies the charges and blames the war in Yemen on Riyadh. —Reuters