Oil prices shaky as Chinese economy offsets trade optimism

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An offshore oil rig

Oil prices rose on Friday but changed as sluggish economic growth in China, the world’s biggest crude importer, raised concerns over fuel demand and countered optimism from the signing of a China-U.S. trade deal.

The world’s second largest economy grew by 6.1% in 2019, its slowest expansion in 29 years, government data showed on Friday.

A well expected fourth-quarter China GDP rate (6%) provided little clue for oil price trading on Friday morning, and mounting downward economic pressure will perhaps limit oil’s upside in the mid to long-term,” said Margaret Yang, market analyst at CMC Markets.

Brent crude futures LCOc1 were up 26 cents at $64.88 a barrel by 1501 GMT. U.S. West Texas Intermediate futures CLc1 were up 21 cents at $58.73.

Oil rose on Thursday after China and the United States signed their Phase 1 trade accord.

The mood was further boosted with the U.S. Senate’s approval of changes to the U.S.-Mexico-Canada Free Trade Agreement.

Surging Chinese demand, as seen in refinery throughput figures, offset the less positive economic growth data.

In 2019 Chinese refineries processed 651.98 million tonnes of crude oil, equal to a record high 13.04 million barrels per day (bpd) and up 7.6% from 2018, government data showed.

The increase in China’s refinery capacity is reshaping the trade flows of refined products, while the increase in U.S. crude oil production is reshaping the trade flows of crude oil,” said Olivier Jakob of consultancy Petromatrix.

Forecasts by two major agencies of a supply surplus this year also weighed on prices.

The International Energy Agency (IEA) on Thursday offered a bearish view of the oil market outlook for 2020.

OPEC supply will exceed demand for its crude, the IEA forecast, even if OPEC member states comply fully with output cuts agreed with Russia and other producers in a grouping known as OPEC+.

The IEA view is somewhat reflected by the Organization of Petroleum Exporting Countries’ own view, which found non-OPEC supply this year growing by more than overall demand.

“If global oil demand continues at last year’s weaker than normal 1% growth rate in 2020 and 2021 then OPEC and its allies might be forced to switch strategy to ‘volume over price’ once again,” Commerzbank said.

OPEC+ has been curbing oil output since 2017 to balance the market and support prices.

Suzan O