Crude falls on downbeat Asia Oct data, release of China fuel reserves

Oil prices fell on Monday amid fresh signs that Asia’s manufacturing recovery is slowing down partly due to soaring raw material costs, and after China released national reserves of gasoline and diesel to ease supply shortages.

At 04:35 GMT, Brent crude was down 26 cents at $83.49/bbl, while US WTI fell 35 cents at $83.22/bbl.

The price weakness follows China’s announcement on Sunday that it has released national reserves of gasoline and diesel to boost market supply and ease supply shortages.

China has seen tight supply and price spikes of diesel in some regions since late September, as factories switched to the fuel amid high coal prices.

Meanwhile, manufacturing activity as measured by purchasing managers’ index (PMI) across Asia were mixed in October, partly weighed down by recent surge in energy prices.

China’s official manufacturing PMI was in contraction for the second month in October and recorded its seventh straight month of decline.

A separate private sector manufacturing PMI by Caixin for China showed an expansionary reading of 50.6 in October, but noted that higher costs for materials, energy and transport drove a sharper rise in average input prices last month.

For Japan, the au Jibun Bank manufacturing PMI for October rose to 53.2 in October as COVID-19 restrictions in the country have been lifted during the month.

But Japanese manufacturers indicated a rise in cost burdens for the 17th straight month in October, with the rate of input cost inflation accelerating from September to reach the fastest since August 2008 mainly due to higher raw material prices.

Oil prices rallied to multi-year highs last week amid expectations that OPEC and its allies will maintain their planned output increase despite global supply concerns.

Market attention will be on the meeting between OPEC, Russia and their allies on 4 November, with the group set to continue with their incremental 400,000 bbl/day output increases.

Crude prices have soared this year as production trailed supply amid a recovery in demand as countries worldwide eased COVID-19 restrictions.

Demand has also been supported by an energy crunch due to the shortages in gas and coal.

US President Joe Biden on 30 October urged major G20 oil producing countries to boost output as the US faces a coal shortage and surging energy prices.

ICIS

Tags: price, oil prices, Brent, Japan, WTI, China