Oil futures rise as global oil demand balance tightens

In the United States, the Federal Reserve will release the central bank reading on industrial production later Monday morning, which is expected to have slipped from a 0.4% increase in August to 0.2% in September, manufacturing output increasing by 0.2%. % to 0.3%. The effects of Hurricane Ida, which made landfall Aug. 29 along the Louisiana coast, reportedly slowed industrial production activity at the end of the third quarter.

China’s economy grew at an annualized rate of 4.9% in the third quarter, the National Bureau of Statistics reported overnight, missing expectations of a 5.2% expansion for the three-month period, with a 3.1% increase in industrial production for September well below consensus. for a growth rate of 4.5%.

The 4.9% increase in gross domestic product was the weakest annual growth rate since the third quarter of 2020, when China was recovering from the COVID-19 pandemic, which caused the virus, which has first hit the world’s second-largest economy. The fall in growth during the last quarter reflects the difficulties of the Chinese real estate sector with its mountain of debt and sharply reduced industrial production in a context of electricity shortages that have forced factories to reduce their operations. In an emergency meeting at the end of September, Chinese Vice Premier Han Zheng, who oversees the country’s energy sector and industrial production, called on the country’s energy companies to procure enough energy for the winter. at all costs.

Global natural gas prices hit record highs in October amid acute coal shortages in China and India and low gas stocks in much of the European Union, which is increasingly dependent on gas after the closure of a multitude of coal-fired power plants to meet climate change targets. The energy shortage in Asia and the European Union is expected to worsen over the next few months, especially if the winter is colder than usual, prompting a switch from gas to oil which is expected to add 500,000 barrels per day (bpd) to more than over 1 million bpd of crude oil demand this winter.

Gazprom, operator of the 759-mile Nord Stream 2 gas pipeline that runs under the Baltic Sea from Ust-Luga, Russia, to Lubmin, Germany, near Greifswald, said on Monday that the first of the project’s two lines was filled with technical gas. , according to Reuters. The Nord Stream 2 pipeline is awaiting EU certification before it can start selling gas to customers in Europe. The process can take four months, with some EU officials quickly voicing their opposition to the certification being granted, alleging that Gazprom is not respecting EU law. This could delay the start of gas sales to Europe on Nord Stream 2 until 2022.

U.S. crude production increased 100,000 b / d to 11.4 million b / d in the first week of October, according to the most recent data available from the Energy Information Administration, while 1, 4 million bpd above early September when Hurricane Ida forced a record number of offshore production shutdowns. in the Gulf of Mexico. The EIA will update onshore crude production later Monday afternoon in its drilling productivity report, while last week U.S. production is expected to average 11.3 million bpd in its energy outlook at short term.

Baker Hughes on Friday reported an increase of 12 active oil rigs in the United States last week, bringing the number of U.S. oil rigs to 445, 240 more than in the comparable week a year. This was the sixth consecutive weekly increase in the number of oil rigs in the United States, with producers adding 51 rigs since Hurricane Ida forced up to 16 rigs offline in late August, early September.

Brian L. Milne can be reached at: brian.milne@dtn.com


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Felix J. Dixon

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