China Continues to Influence Energy Pricing
August 15, 2023
Right, wrong, or indifferent China continues to be used as the reason for majority of the energy markets price actions. The latest pullback is being brought on by the woes of Country Garden Holding’s share price crashing in early Hong Kong trading. Poor economic outlook for China creates concerns for energy demand and pressures prices. It was China’s rebound coming out of COVID lockdowns that was going to drive prices higher and it has for the most part as the early optimism was good but as more weak economic data arrives the market grows more concerned about China.
The EIA reported yesterday afternoon with the release of its Monthly Drilling Productivity Report, it is forecasting US crude oil output from US shale production regions in September will fall to its lowest level since May 2023, due to declines in the Permian and Eagle Ford regions.
Energy prices were also lower as Nigeria reopens a major oil terminal that was closed on July 12th due to a leak. The US dollar index also rallying to a 1-month high is also putting pressure on crude oil prices.
Also bearish for prices is Iran which has manages to restore its production back near a 5 year-high of 3 million barrels per day. The US is also in negotiation again with Iran on the nuclear issues and if a deal is made the US could lift some of the sanctions on Iran and if so, that would allow them to put more oil into the global market.
As is normally the case there are still bullish factors for the market. Supplies continue to be tight and so far, demand has remained strong. The IEA is still forecasting world petroleum demand to set a record high in August after reaching a new record high in June of more than 103 million bpd.
Goldman Sachs in a research note to clients has adjusted their retail price forecast for US gasoline to now average $3.60 per gallon through 2024.