Oil Prices Surge on Chinese Economic Strength and Record Consumption

Oil prices extended their gain in the earlier hours of Friday following better-than-expected Chinese economic data and reports indicating record-breaking oil consumption.

The reports have bolstered market confidence as the world’s second-largest consumer of crude oil and the largest importer of the commodity is poised for an ongoing demand surge.

Brent crude oil, against which Nigerian oil is priced, increased by 65 cents or 0.7% to $94.35 per barrel while the U.S. West Texas Intermediate crude (WTI) gained 0.7% or 67 cents to $90.83.

The robust performance of China’s industrial output and retail sales in August exceeded expectations, offering evidence that the world’s second-largest economy is gradually stabilizing after a protracted period of uncertainty.

Also, data released by the National Bureau on Friday revealed a surge in oil refinery processing volume to 64.69 million tonnes in August, representing a 19.6% increase compared to the previous year.

This volume is equivalent to a daily production rate of 15.23 million barrels per day (bpd).

Refining throughput experienced a significant surge as Chinese processors maintained high run rates to cater to the increased demand associated with summer travel and capitalized on the favorable margins for exports to Asian consumers.

Edward Moya, an analyst at OANDA, said, “Investing in oil has become a favored trade on Wall Street. There is a widespread consensus that the OPEC+ decision at the end of last month will continue to tighten the oil market significantly in the fourth quarter.”

This surge in Chinese refining rates coincides with output cuts implemented by major producers such as Russia and Saudi Arabia, leading to growing concerns about supply disruptions.

Consequently, these concerns have propelled both Brent and WTI to their highest levels since November.

The International Energy Agency (IEA) added its voice to the discourse this week, projecting that the extended oil output cuts by Saudi Arabia and Russia would result in a market deficit persisting throughout the fourth quarter.