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China Sourcing Update: Energy Costs (Feb 2018)

Energy Costs

1. Crude prices tumble and then rebound in February

In line with the movement of global crude prices, China’s crude prices plunged during early to mid-February and picked up afterwards.[1] For instance, after falling from US$62.6 per barrel on 2 February to US$56.0 per barrel on 14 February, the Daqing [2] crude price rose to US$59.5 per barrel on 28 February 2018.

In early February, the Dow Jones Industrial Average suffered two 1,000-point drops within four days after concerns over a faster pace of interest rate hikes triggered a sharp rise in the US bond yields. The increased volatility in global financial markets led to more risk aversion and thus capital outflow from commodities, causing the drop in global crude prices in the first half of February.

Crude prices rebounded in the second half of the month as global financial markets stabilized. An unanticipated fall in the US crude inventories also supported oil prices. The US Energy Information Administration (EIA) reported on 22 February that commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) in the US dropped unexpectedly in the week ending 16 February.

Please click to read the full report.

[1] From the year 2000 onwards, China’s crude prices were determined with reference to global crude prices.

[2] Daqing Field is the largest oil field in China.

Content provided by Fung Business Intelligence
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