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China Sourcing Update: Energy Costs (Nov 2017)

Crude prices fluctuate at high levels in November

In line with the movement of global crude prices, China’s crude prices fluctuated at relatively high levels in November. For instance, after jumping from US$54.5 per barrel on 2 November to a two-year high of US$58.7per barrel on 7November, the Daqing crude price retreated to US$55.3per barrel on 17 November, and then rose again to close atUS$57.0 per barrel on 30 November(see exhibit 1).

Two major factors were behind the high global oil prices in the month. First, there were market fears that geopolitical tensions in the Middle East could disrupt oil supply from the region. In addition to investors’ concerns over Iraqi government’s actions in Kurdistan oil-producing areas and potential new US sanctions on Iran, political uncertainty in Saudi Arabia pushed oil prices higher in early November as dozens of princes, ministers and senior officials were detained as part of an anti-corruption campaign in the country.

Second, market expectations of an extension of the oil production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) supported oil prices in the month. On 30 November, the OPEC and Russia finally agreed to extend the output cuts through the end of 2018, further easing market fears over an oil supply glut.

Looking ahead, we expect global oil prices to stay high in the near future as concerns over the global oil supply glut continue to wane.


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Content provided by Fung Business Intelligence
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