WTI, Brent Rally as Supply Constraints Outweigh China Demand Concerns
Oil prices surge above $90 despite analysts cutting forecasts for China's Q4 crude imports by 400,000 barrels per day.
Front-month oil futures rose sharply on Wednesday, with West Texas Intermediate (WTI) crude gaining 1.64% to settle at $90.85 per barrel, according to live market data. Brent crude, the international benchmark, climbed 1.81% to $97.90. The price for Bakken crude traded at a differential of -$3.42 versus WTI.
The rally occurred despite bearish signals from the world's largest crude importer. Analysts at consultancies FGE NexantECA and Energy Aspects have revised down their projections for China's crude oil imports in the fourth quarter by about 400,000 barrels per day (bpd), according to a report from OilPrice.com. They now expect imports of 9.2-9.3 million bpd, well below last year’s average of 11.6 million bpd.
High prices are cited as a primary constraint. Chinese independent refiners, known as "teapots," are struggling with crude prices above $100 per barrel for Brent and the effective disappearance of cheaper supply from Iran and Venezuela due to U.S. foreign policy decisions, OilPrice.com reported. State-owned giants are also hesitant to buy at these levels amid record-high freight costs.
The price strength appears driven by broader global supply tightness, overshadowing the tempered demand outlook from China. Concurrently, China's thermal coal prices surged to a three-year high this week, jumping 24% since mid-July due to lower domestic production and reduced imports from Indonesia, according to a separate OilPrice.com report. This signals intense competition for all fossil fuels to meet energy needs.
For Bakken operators, the sustained high price environment for global benchmarks is a positive signal, even with the regional discount. A WTI price firmly above $90 provides strong revenue potential for Williston Basin producers. The widening differential for Bakken crude, now at -$3.42, indicates local logistical or quality factors but remains within a typical historical range when prices are elevated.
The market is balancing significant supply constraints against demand headwinds. The report notes China's August imports were still 23.4% lower year-on-year, though improved from June's decade low. With major exporters facing challenges and global inventories tight, the supply-side factors are currently providing stronger support for oil prices than China's import cuts are applying downward pressure.
Source
Live Price Data, OilPrice.com (Analysts Cut China's Q4 Crude Import Forecasts by 400,000 Bpd, China’s Thermal Coal Prices Surge to Three-Year High)
