Oil Prices Drop Sharply as Chinese Demand Weakens

Front-month West Texas Intermediate crude oil futures fell sharply on Thursday, trading down $3.02, or 3.15 percent, to $93 per barrel, according to live market data. Brent crude, the international benchmark, followed suit, declining $3.09 to $94.72 per barrel.

The sharp decline was driven by significant weakening in demand from China, the world's top crude importer, according to a report from OilPrice.com. The premium for Iranian Light crude has slipped into a discount for the first time in two months, trading between $0.50 and $1 per barrel below ICE Brent for June delivery into Shandong province. Just a month ago, the same cargoes commanded premiums of $1–2 per barrel.

The price for Russia's popular ESPO crude grade has also softened, with its premium over Brent falling to $3–4 per barrel for June, down from $4–5 per barrel in May, OilPrice.com reported. This shift is attributed to waning demand from China's independent refiners, known as "teapots," who are major buyers of both Iranian and Russian crude.

Despite ongoing supply disruptions from the Middle East, Chinese teapots are reducing their intake as high crude prices push them into losses, according to the report. In response, China's National Development and Reform Commission has reportedly authorized some struggling refiners to reduce fuel output to no lower than 80% of last year's monthly average, easing a previous policy mandating sufficient domestic supply.

The Bakken crude differential, a key metric for North Dakota producers, was holding at a discount of $3.42 per barrel below WTI on Thursday. This price move, if sustained, directly reduces the wellhead revenue for operators across the Williston Basin. The sudden drop underscores the global nature of the oil market, where demand shifts in Asia can swiftly impact local producer economics.

In related energy markets, natural gas prices showed modest strength, rising $0.04 to $3.25 per MMBtu.

Analysts are warning that any relief at the pump for U.S. consumers may be fleeting. A separate report from Rigzone highlighted that while U.S. gasoline prices are currently "plunging," the "relief may be short lived." This suggests underlying market tightness could reassert itself, potentially reversing today's crude price losses.

For Bakken operators, today's price action highlights the continued volatility and sensitivity to international demand signals, particularly from China. The ability of the region's producers to maintain drilling and completion activity is closely tied to the realized price for Bakken crude, which is now under $90 per barrel.