Oil prices fell on Tuesday as weak Chinese demand offset US supply cuts and risks of a global oil glut continued to weigh on the market.
Brent crude futures were down 32 cents, or 0.45%, at $71.51 a barrel by 0652 GMT. WTI Crude futures were down 38 cents, or 0.55%, at $68.33 a barrel.
Both indices had gained about 1% at Monday’s close.
The U.S. Coast Guard ordered all operations at Brownsville and other smaller Texas ports to close on Monday evening as Tropical Storm Francine moved across the Gulf of Mexico.
The port of Corpus Christi remained open with restrictions. The tropical storm is expected to strengthen significantly over the next few days and is expected to become a hurricane by Monday night or Tuesday morning, according to the National Hurricane Center (NHC).
Exxon Mobil said it has halted production at its Hoover offshore production platform, while Shell has halted drilling at two platforms. Chevron has begun halting oil and gas production at two offshore production platforms.
At least 125,000 barrels per day (bpd) of oil capacity is at risk of disruption. However, signs of weakening global demand and expectations of an oil glut weighed on the market.
Chinese data on Monday showed that the country’s consumer inflation rose at its fastest pace in six months in August, but domestic demand remained fragile and producer price deflation worsened.
Data released on Tuesday showed that China’s exports rose at their fastest pace in nearly 1.5 years in August, while imports were disappointing amid weak domestic demand.
Chinese trade data failed to reassure the oil market, only adding to long-standing demand concerns in the market.
The latest data shows another month of annual declines in crude oil imports, which now leaves YTD imports more than 3% behind last year.
Later in the day, markets will be watching the monthly oil market report from the Organization of the Petroleum Exporting Countries (OPEC).
The U.S. Energy Information Administration (EIA) is also set to release its short-term energy outlook, with estimates for global markets and U.S. crude oil production.
Oil prices are expected to hover between $60 and $70 a barrel due to weakening Chinese demand and a continuing global oversupply.
Pongpun Amornvivat, senior vice president of trade at Thailand’s energy company PTT, said on Tuesday that lower crude oil prices could provide China with an opportunity to add to its oil stockpiles.
However, the modest 0.5% increase in overall Chinese imports, which fell short of expectations, suggested that Chinese consumers are overly cautious and reluctant to spend.
Without further fiscal easing, it is hard to see this changing in the near future, and this uncertainty will continue to cast a shadow over China’s economy and crude demand.
