Energy - - Dec 28,2016
According to an analyst at ClipperData, OPEC’s effort to equalize the overbalanced oil market could be affected by the unplanned consequence of crumpling crude demand from China.
The head of commodities research at ClipperData, Matt Smith, said the dipping demand from China, known to be the world’s second largest oil consumer, would surely impact OPEC’s recently planned strategy.
The Organization of the Petroleum Exporting Countries, in collaboration with the non-members, is going to reduce the production for cutting short the stockpiles of oil that have been stored in the last two years surrounded by weak oil prices.
The oil prices have risen up to 20 percent since OPEC and other producers have fixed a deal to decrease the output. On Tuesday, there was a significant rise in the prices as traders anticipate the Jan 1st opening of OPEC’s fresh program.
The current price surge is not a good news for the oil markets as it could result in less critical buying from China, as stated by Smith.
Over the years, China has enhanced the lust for oil, making it a tremendous power to rule prices in a situation where producers are trying to negate low prices by pulling more business. The dominant nation has used to hit producers against one another, as quoted by expert analysts.
There are scares that if the Chinese oil demand slumps in the light of soaring prices, it would make it difficult to reduce the crude reserve.
The impact is quite evident in the trading of oil from OPEC’s three largest suppliers, Iraq, Saudi Arabia and Iran. China is seeking discounts from several oil exporters which have shown a significant variation in the number of shipments to the country.