Oil Drops Following Chinese Economic Data

Oil prices saw a drop this morning, following China’s weaker-than-forecasted economic data delivery and diminishing of crude processing.

Chinese economy saw an expansion of 4.9% in Q3, missing expectations of 5.2%.  Meanwhile, Chinese refineries - the world’s second largest oil users, have slowed  their processing rates in September. The mix of largely disappointing data and the diminishing of crude processing is hardly painting a positive picture for the day, especially since Chinese oil buying is expected to slow even more in the fourth quarter as a result of high inventories and limited import quotas for independent refiners.

The markets are now eyeing the Joint Ministerial Monitoring Committee (JMMC) meeting of the OPEC+ group, scheduled later today. The meeting is expected to yield vital results, such as whether current supply cuts of 7.7 million barrels per day (bpd) will be reduced by 2 million bpd starting in January. Further discussions are especially important now, following the depressing demand outlook unveiled during last week’s OPEC+ Joint Technical Committee meeting, which summed up the effect of the second-wave of COVID-19 and a rise in Libyan oil output.

"There are growing calls for OPEC+ to scrap their current plan of easing output cuts," ING analysts comment, adding, however, that the market may still have to wait until the next OPEC+ meeting in the end of November for any set-in-stone decisions.

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