In Asia, crude oil futures were down on March 27, despite an increase in Chinese industrial company profits. At 2:05pm Singapore time, the May Brent contract on the ICE was down 80 cents at $85.45 a barrel, while the May light sweet crude contract on the NYMEX was down 72 cents at $80.90 a barrel. This trend comes as Chinese industrial firms posted a 10.2% rise in profits over January and February, the first positive growth since June 2022, driven by China’s manufacturing sector.
Economic recovery in China
Lynn Song of ING points to an economic recovery in China after a year of slowdown, despite a weak base effect in 2023 that will inflate annual figures. Nevertheless, analysts remain cautious about economic growth and oil consumption in China, with the absence of strong stimulus policies maintaining uncertainty, particularly in the construction sector, which is essential for oil demand.
Geopolitical influences and OPEC
Geopolitical tensions, including the breakdown of ceasefire talks in Gaza and new tensions in the Red Sea, are rekindling fears of trade disruptions. Attention is also focused on OPEC, in particular regarding adherence to production quotas, with a meeting of the Joint Ministerial Monitoring Committee scheduled for April 3 to review compliance with the production agreement.
The pressure on oil prices is also due to estimates showing an increase in US crude oil inventories of 9.3 million barrels for the week ending March 22. This data from the American Petroleum Institute contrasts with a forecast of a 2 million barrel reduction in US crude oil inventories, according to analysts surveyed by S&P Global Commodity Insights. Investors await official data from the US Energy Information Administration.
