China just gave the energy market another reason to stress

4 weeks ago 14

Large ships and tugboats operate near an offshore pier in a wide blue harbor with distant shoreline infrastructure.

China is putting fresh pressure on energy markets as global oil prices hover at a key threshold.

Brent crude oil abruptly spiked above $100 a barrel on Thursday, reversing course after earlier declines following a report that refiners in China are suspending exports in October.

Brent crude prices surged nearly 4% to $101.50 a barrel, while US oil prices rose 2% to $92.54.

According to Reuters, Chinese refiners have suspended fuel exports for the month to preserve domestic oil stocks, putting new pressure on a corner of the oil trade already facing a supply squeeze.

"If Chinese barrels disappear from the export market, buyers elsewhere have to compete for an even smaller pool of refined products," stated Anindya Banerjee, head of research at trading platform Kotek Neo's currencies and commodities desk.

The export pause isn't the only complication impacting Brent crude prices. It comes as China, the world's largest oil refinery hub, enters a week-long holiday. For the month of October, refiners are only authorized to ship oil products to Macau and Hong Kong.

For other customers, the outlook remains uncertain. While oil exports out of the Persian Gulf region of the Middle East have mostly bounced back from the disruption caused by the Iran war, China's new disruptions could keep a floor under crude prices.

The latst news has potentially dire implications for areas such as diesel and jet fuel, two corners of the energy market already grappling with high prices that are being passed on to consumers. PetroChina, China's state-run oil major, has already cancelled several October jet fuel and gasoline shipments that it had planned for October.

Diesel is the US has surged to record high prices. The surge in the industrial fuel was described by Bank of America as a "real economy pressure point," as diesel powers shipping and freight industries that transport consumer goods.

Banerjee added that China is one of the few nations capable of delivering some relief to the global oil market. In his view, if Beijing continues to prioritize its own domestic energy security, it could lead to deeper problems globally.

"Even if crude periodically corrects on macro headlines, the extraordinarily tight refined-product market should continue to provide an underlying floor to oil prices until refining margins meaningfully cool," he stated.

Samuel O'Brient is an experienced financial markets and business journalist who has written extensively on a wide range of topics involving economics, technology and public policy. At Business Insider, he covers important macro and micro economic stories, including takes from leading economists and hedge fund managers, breaking IPOs, corporate bankruptcies, meme stocks and short-selling. He also writes on other markets such as crypto, oil and real estate.He has interviewed many of the market’s most influential voices, ranging from top economists such as Mark Zandi and Richard Thaler to prominent investors including Danny Moses, Andrew Left, Anthony Scaramucci, Louis Navellier and Grant Cardone.Programs such as LiveNOW from Fox , Taking Stock and Ticker News have had Samuel on to discuss stock market and economic developments. His reporting has been cited by The New York Times DealBook, Bloomberg Radio, Forbes, Entrepreneur, Gizmodo and TheFutureParty.Samuel began at InvestorPlace, covering investing, retail trading and macro economic trends. Prior to joining Business Insider, he served as a technology markets reporter at TheStreet. He is a graduate of Sarah Lawrence College and Trinity College Dublin.Samuel's work has appeared in publications such as TipRanks, EV and Observer. When he isn't chasing down stories, he can often be found browsing book and record shops. To reach Samuel, email him at sobrient@insider.com or connect with him on LinkedIn. He is also on Signal as Samuel Clemens.