Oil falls amid falling demand in China, but India supports vegetable oil market with active imports

Since Monday, oil prices have fallen by 2.2-2.5% amid pessimistic data on the Chinese economy and a gradual decline in demand.

China cut its crude oil imports in July by 19% from June to a six-month low of 10.33 million barrels per day, while the country’s oil inventories rose to a record 1.02 billion barrels on July 27. Industrial production in China rose 3.7% in July, compared to expectations of 4.3%, and retail sales rose 2.5% (against expectations of 4%), the slowest growth in 5 months.

In July, China reduced exports compared to July 2022 by 14.5% to a five-month low of $281.76 billion, and imports by 12.4% to the lowest since May 2020 at $201.16 billion. Import volumes have been falling for 5 months in a row, in particular as a result of reduced domestic demand. In January-July, compared to the same period last year, exports decreased by 5% and imports by 7.6%, and the foreign trade surplus amounted to $489.57 billion.

India, the world’s third-largest consumer of crude oil, cut its imports in June by 1.3% to a 7-month low of 19.7 million tons, which increased pressure on prices.

According to Bloomberg, in the 4 weeks to August 6, crude oil supplies from the Russian Federation decreased to 3.02 million barrels/day, which is 870,000 barrels/day less than the peak in mid-May.

Prices for Russian Urals oil exceeded $70/barrel, and the discount relative to the reference Brent decreased to $13.9/barrel against the background of the circumvention of the sanctions price ceiling ($60/barrel) by inflating the cost of commissions and transportation of Russian oil by vessels connected to the Russian Federation, which brought Moscow an additional $1.2 billion in 3 months.

Since Monday, October Brent oil futures on the ISE exchange have fallen 2.2% to $84.9/barrel, adding 8.1% for the month, which supported the prices of vegetable oils.

September palm oil futures on the Malaysian exchange remained steady at 3,783 ringgit/t or $818/t (0% weekly, -3.5% fortnightly) amid stronger demand from India.

On the Chicago Stock Exchange this week, September soybean oil futures rose 2.7% to $1,451/t (+5.4% on the month) amid a decline in soybean inventories, while December futures rose 2.8% to $1,364 /t (+2.5% for the month) on forecasts of an increase in the soybean harvest in the USA.

Demand prices for Ukrainian sunflower oil for the week fell by $30-40/t to $800-830/t FCA and to $920/t with delivery to buyers due to a decrease in demand against the background of increased offers of rapeseed oil in the EU.

According to the Producers Association of India (SEA), the country imported 1.77 million tons of vegetable oils in July, compared to 1.31 million tons in June and 1.21 million tons in July 2022. Compared to the previous month, palm oil imports in in July grew from 683,000 tons to 1.08 million tons, sunflower – from 190 to 327,000 tons, soybean imports decreased from 437 to 342,000 tons, and vegetable oil stocks increased by 12% to 3.2 million tons. In total, in 2022 /23 MY India increased import of palm oil from 4.86 to 7.11 million tons compared to 2021/22 MY, sunflower – by 45% to 2.18 million tons, but decreased import of soybean oil by 15% to 2.82 million t.

On August 16, the Egyptian GASC will hold an international tender for the purchase of vegetable oils with delivery from September 20 to October 8, which will become a new benchmark for prices.