There were some encouraging economic data points and some disappointments out of China Monday, but oil exchange traded funds barely responded with the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, trading slightly lower early in the session.
Looking ahead, fundamentals are improving. The International Energy Agency projects consumption to increase each quarter of 2019 year-over-year, albeit at a slower-than-usual pace for the first quarter. Meanwhile, on the supply side, Saudi Arabia and other members of the Organization of Petroleum Exporting Countries have been cutting output. Additionally, U.S. sanctions on Iran and Venezuela have reduced further bets on international supplies.
“Gains were limited due to the headline Chinese data released earlier on Monday, showing that China’s economic growth in the second quarter of this year was at 6.2 percent, in line with expectations but the weakest growth in the country in 27 years,” reports OilPrice.com.
All About China
Last month, the U.S. Energy Information Agency (EIA) cut its forecasts for 2019 world oil demand growth and U.S. crude production in light of the growing trade tensions between the world’s two largest economies that have crippled economic activity.
“China’s industrial output and retail sales in June, however, trumped analyst expectations, suggesting that the state of the industry is not as bad as the gloomiest forecasts had it, and that oil demand growth could be supported through the end of the year,” according to OilPrice.com.
That industrial output report may have been the silver lining in the batch of data out of the world’s second-largest economy Monday and could bode well for oil prices over the near-term.
“Despite the lowest Chinese economic growth in nearly three decades, industrial data wasn’t all that bad and helped oil prices edge up early on Monday morning, with prices additionally supported by the fact that 72.82 percent—or to 1,376,265 bpd—of the current oil production in the U.S. Gulf of Mexico was shut-in as of Sunday in response to the tropical storm Barry,” according to OilPrice.
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