Oil Slips on OPEC Output, China Slowdown
China's crude imports down 23 pct in May; OPEC oil production likely to continue to exceed demand.
Oil prices slipped on Monday on news of a slide in China's fuel imports and as markets digested OPEC's decision to maintain its production target, which analysts said could prolong a supply glut for the rest of the year.
China, the world's biggest net oil importer, bought nearly a quarter less crude in May than it did in the previous month, official data showed. China's imports of oil products also fell by more than 6 percent while oil product exports fell 10 percent.
The Chinese data came after the Organization of the Petroleum Exporting Countries (OPEC) agreed on Friday to maintain oil output at levels well above current demand, exacerbating a glut where millions of barrels of crude are stored without a buyer.
"The OPEC decision is bearish for oil," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. "It means we will have an oversupplied market for the rest of the year."
Brent for July dropped to a low of $62.70 a barrel on Monday before recovering to around $62.95 a barrel by 1040 GMT, down 36 cents. U.S. crude was at $58.70 a barrel, down 43 cents.
Several analysts said they expected oil prices to fall in the wake of the OPEC meeting as supply gradually overwhelmed demand in many markets.
"The oil market still looks like it is heading for trouble," Barclays commodities analysts said in a report, adding that a global oil market surplus would last for the rest of 2015, although it would probably shrink in the second half of the year.
"This means that global oil stocks, already at record highs, will continue to climb, resulting in further downward pressure on prices," they said.
Goldman Sachs oil analysts agreed: "We forecast that Saudi and other low-cost producers will continue to increase output as this is the next logical step to maximizing revenues in the face of shale oil's scalability."
Morgan Stanley analysts led by Adam Longson said the future oil market focus was likely to be on rising supplies, particularly if Iran agreed a nuclear deal leading to the end of economic sanctions on the Islamic Republic.
"We believe the market will increasingly turn its attention to the risk that Iran could add new supply to the market," they said in a note.
Analysts expect U.S. drilling to start increasing again in the second half of this year following 26 weeks of decline.
By Christopher Johnson