The oil complex settled higher Tuesday as fresh Chinese economic data provided bullish fodder, despite the statistics having an overall mixed message.
Front-month NYMEX crude closed 10 cents higher at $82.81/b. The November contract expired Tuesday. December delivery becomes the front-month contract starting Wednesday. NYMEX December crude settled at $82.49/b, up 58 cents.
ICE December Brent settled up 82 cents at $86.22/b.
In refined products, NYMEX November ULSD ended 2.76 cents higher at $2.5132/gal, while front-month NYMEX RBOB closed up 1.32 cents at $2.2134/gal.
China's gross domestic product grew 7.3% year-on-year from July through September, official data showed. The growth rate was just above analysts' expectations, but was the slowest since the first quarter of 2009.
Chinese oil demand rose in September as refineries processed the second-highest monthly amount of crude on record. China's refinery throughput averaged 10.27 million b/d, a 9.1% year-on-year increase, according to data from the National Bureau of Statistics.
As the world's largest energy consumer, the Chinese economy is closely scrutinized. Forecasts have generally been bearish, a view underscored last week when the International Energy Agency trimmed its 2014 and 2015 outlook for Chinese oil demand.
The data released Tuesday would seem to point in the opposite direction, indicating that a relatively strong appetite exists and appears consistent with reports of active Chinese buying in recent weeks.
Chinese demand has helped absorb an excess of crude in the market, leading Mediterranean and West African grades to strengthen and Dubai to flip into backwardation, Energy Aspects said in a research note Tuesday.
In the Mediterranean, Azeri Light was assessed at a $3.85/b premium to Dated Brent Tuesday, compared with a $1.50/b premium at the end of September.
The rise in West African price differentials has been less dramatic. Bonny Light was assessed at a $1.45/b premium to Dated Brent Tuesday, compared with a 50 cents/b premium at the beginning of August.
The question now becomes whether China's crude buying and high refinery run-rate reveal strong underlying demand for end-use products.
According to Energy Aspects, the rise in refinery runs suggests a "moderate pick-up in demand," but the consultancy says other factors are likely at play.
The bulk of buying is probably still earmarked for China's new strategic petroleum reserve and commercial stockpiles, as refineries begin building forward cover inventories, the consultancy said.
"It will be key to wait for product inventory numbers to see if increased runs are being underpinned by demand, or a product glut forms that is transferred back to crude," Energy Aspects analyst Amrita Sen said.
Chinese economic data helped pivot attention away from the Middle East as analysts continue trying to figure out whether Saudi Arabia is willing to live with lower oil prices or will move to cut production.
"I think the Saudis will jawbone the market into stability by assuring the market they could do something in a minute if they wanted to, and then hope the winter is cold," Bill O'Grady, chief market strategist at Confluence Investment Management, said.
Supply disruptions could also emerge in the Middle East, leading prices higher, another reason why the Saudis may be content to delay any production cuts, he said.
