OIL FUTURES: Crude lower on China stimulus uncertainty; OPEC decision awaited

Crude oil futures were lower in midafternoon Asian trade March 27, despite China's industrial firms posting higher profits, as lingering uncertainty over further stimulus measures from Beijing weighed on sentiment.

At 2:05 pm Singapore time (0605 GMT), the ICE May Brent futures contract was down 80 cents/b (0.93%) from the previous close at $85.45/b, while the NYMEX May light sweet crude contract fell 72 cents/b (0.88%) at $80.90/b.

China's industrial firms posted higher profits over January and February, rising 10.2% on the year, according to data from the National Bureau of Statistics March 27.

The latest figure was the first positive growth rate since June 2022, with the recovery led by China's manufacturing sector.

"After an upside surprise to industrial production to start the year, a further recovery of industrial profits sends another signal that we are indeed seeing a gradual recovery after a bottoming out last year," ING's Chief Economist for Greater China, Lynn Song, said following the NBS data.

Nevertheless, he highlighted that economic data from China will still benefit from a weak base effect from 2023, which will boost year-on-year numbers through the course of this year.

Bracing for caution

Analysts continued to remain cautious in their outlook for China's economic and crude consumption growth, as constrained stimulus levers limit Beijing's ability to lift investor confidence.

"If the recovery of manufacturing continues, it would contribute toward reaching the 2024 growth target, but more supportive policies are still needed to sustain the momentum and recovery," ING's Song said.

So far, the lack of strong policy signals from the government has fueled uncertainty over construction activity in China, ANZ Research analysts said March 27.

The country's embattled real estate and construction industries remain a key wildcard in China's demand outlook given its position as a critical crude and oil product consuming sector.

"Renewed concerns over demand in China weighed on sentiment across the commodities markets," ANZ Research highlighted, adding that geopolitical tensions also weighed on crude oil in particular.

OPEC in focus

A breakdown in ceasefire talks in Gaza, along with fresh tensions in the Red Sea, have rekindled worries over the ramifications of trade disruptions on global economic growth.

"Traders are also watching OPEC members for any sign they may be altering their stance on production quotas," ANZ Research said, noting that the bloc's Joint Monitoring Ministerial Committee is due to meet April 3 to review the current adherence to the production agreement.

Several members, including OPEC's second largest producer, Iraq, have admitted to over production in recent months despite caps to output levels, the analysts said, with compliance to the bloc's oil supply policy remaining a key focal point in the coming months.

Crude prices were also pressured by estimates showing US crude oil inventories rising 9.3 million barrels in the week ended March 22.

The data from the American Petroleum Institute also showed a 4.4 million barrel draw in gasoline stocks, while distillate inventories are estimated to have risen by 531,000 barrels over the same period.

The API estimates are in contrast to a 2 million barrels draw in US crude inventories indicated by analysts S&P Global Commodity Insights surveyed.

Investors await official US Energy Information Administration data due later in the global day.