Brent dips after breaking $85
Meanwhile, the number of operational US oil rigs rises to a 17-month high
Brent crude futures traded down on Tuesday afternoon, having briefly broken past $85 per barrel earlier in the day.
Having risen to a new three-year high above $85.70 per barrel early on Monday, Brent crude futures have struggled to remain above the $85 threshold.
The commodity’s international benchmark has risen by $10 in the past month, driven by the ongoing disparity between supply and demand, high levels of inflation globally and deepening fears of a looming energy crisis in China.
China's energy crisis
Although the onset of winter will affect fuel demand across the northern hemisphere, it will come upon a Chinese economy that is already struggling with runaway energy costs.
On Monday, the National Bureau of Statistics (NBS) revealed that China’s economy grew by only 0.2% between August and September, while year-on-year GDP fell to 4.9%, the lowest reading of the year thus far.
Although regulators have moved to stabilise rising commodity prices, their efforts have thus far yielded little. Even China’s first ever sale of its strategic oil reserves did little to reverse crude’s rise.
At the same time that Beijing has attempted to stabilise prices and ease the oil supply, it has made refinery and drilling activity harder through the imposition of new environmental regulations and targets.
The NBS also revealed that the world’s second-largest economy’s daily crude oil processing rate fell by 2.6% year-on-year to 13.64 million barrels per day (bpd). For the first nine months of 2021, however, throughput stood 6.2% higher year-on-year, at 14.09 million bpd.
Global supply anxiety
China is by no means alone in its struggle to get oil prices back under control. US President Joe Biden repeatedly urged the Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, to accelerate their planned easing of supply cuts imposed in response to the Covid-19 crisis.
With such efforts rebuffed, production in the US is expected to accelerate. According to energy services firm Baker Hughes Co, the US oil and gas rig count rose to 543 in the week ending 15 October, the highest number recorded in 17 months.
Japanese Prime Minister Fumio Kishida similarly stated this week that he will urge oil producers to step up output and pledged to support industries affected by recent spikes in energy costs.