Oil closes lower on China’s demand prospects

Oil drilling rigs

Oil prices closed lower today, June 20, as markets assessed demand prospects from China.

China National Petroleum Corporation – the largest oil and gas producer in China – lowered its expectations regarding domestic demand for oil this year, amid continued doubts about the extent of economic recovery after COVID-19 restrictions were lifted.

It expects that Chinese demand will grow by 3.5% to 740 million tons. The outlook is lower than March estimates, which indicated a growth of 5.1% this year.

Data from the General Administration of Customs showed that China's imports of Russian oil increased by 15.3% in May, on an annual basis, to 9.71 million metric tons, or 2.29 million barrels per day, which is the highest level ever.

Russian refineries processed 5.49 million barrels per day during the week ended June 14, the highest since the second half of April, as the country's maintenance season draws to a close, Bloomberg reported, citing a source familiar with the matter.

Indian Oil Minister Hardeep Puri tweeted after a meeting with his Iraqi counterpart that India intends to increase its annual purchases of Iraqi oil, which currently stands at one billion barrels, Reuters reported.

The spread between the sweet, light Louisiana crude and the Argus index of sour, high-sulfur crude – the reference price for all Saudi, Kuwaiti and Iraqi crude oil sales to the US – narrowed to $1.70 a barrel last week from about $6.75 a barrel at the beginning of the year.

Meanwhile, the markets are awaiting the American Petroleum Institute’s report on oil inventories on June 21, and the US Energy Information Administration’s official data for inventories on June 22.

Brent crude futures for August delivery fell 0.95%, or 71 cents, to close at $75.90 a barrel.

WTI crude for July delivery declined 1.8%, or $1.28, to record $70.5 a barrel.