China’s economy, the world’s second-largest, grew by 6.1% in 2019, its slowest expansion in 29 years, government data showed on Friday. “Mounting downward economic pressure will perhaps limit oil’s upside in the mid- to long-term,” said Margaret Yang, market analyst at CMC Markets. But surging Chinese demand, as seen in refinery throughput figures, helped offset the less positive economic growth data. In 2019 Chinese refineries processed 651.98 million tonnes of crude oil, equal to a record high 13.04 million barrels per day (bpd) and up 7.6% from 2018, government data showed. Throughput also set a monthly record for December. “The increase in China’s refinery capacity is reshaping the trade flows of refined products, while the increase in U.S. crude oil production is reshaping the trade flows of crude oil,” said Olivier Jakob of consultancy Petromatrix.
Prices rose on Thursday after China and the United States signed their Phase 1 trade accord. As part of the deal, China committed to an additional $54 billion in energy purchases. But still, some were skeptical about fallout from the deal. “China has agreed to purchase a massive amount of U.S. oil that may prove difficult to digest,” Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, said in a note. “This has contributed to the oil market’s muted response to Phase 1 thus far.”
The market was also lifted by the U.S. Senate’s approval of changes to the U.S.-Mexico-Canada Free Trade Agreement. Looking ahead, the International Energy Agency (IEA) on Thursday offered a bearish view of the oil market outlook for 2020. Supply from the Organization of the Petroleum Exporting Countries will exceed demand for its crude, the IEA forecast, even if OPEC member states comply fully with output cuts agreed with Russia and other producers in a grouping known as OPEC+. The IEA view is somewhat reflected by OPEC’s own view, which found non-OPEC supply this year growing by more than overall demand. OPEC+ has been curbing oil output since 2017 to balance the market and support prices.
