Oil dips on falling Chinese crude imports; overall market still well supported

China's October oil imports fell sharply from a near record-high of about 9 million barrels per day in September to just 7.3 million barrels per day in October, data from the General Administration of Customs showed on Wednesday.

SINGAPORE: Oil markets dipped on Wednesday as Chinese crude imports fell to their lowest level in a year, although traders said that overall markets remained well supported largely due to OPEC-lead supply cuts.

Traders said the market was eyeing growing tensions in the Middle East with concern, keeping a cautious tone on trade.

Brent futures, the international benchmark for oil prices, were at USD 63.55 per barrel at 0434 GMT, down 14 cents, or 0.2 percent, but still not far off a near two-and-a-half year high of USD 64.65 a barrel reached earlier this week.

US West Texas Intermediate (WTI) crude was at USD 56.99 per barrel, down 21 cents, or 0.4 percent, from their last settlement, but also still not far off the USD 57.69 a barrel reached earlier this week - the highest since July 2015.

China`s October oil imports fell sharply from a near record-high of about 9 million barrels per day (bpd) in September to just 7.3 million bpd in October, data from the General Administration of Customs showed on Wednesday. That`s their lowest level since October 2016.

Despite this, oil markets remain well supported, traders said.

This is largely due to an ongoing effort lead by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold supplies in order to prop up prices.

With crude still more than 40 percent up since June, oil-consuming industries that benefited from comparatively low prices are now starting to feel the pinch.

"2016 was a record year for profits," said Brian Prentice, partner at aviation services firm Cavok.

"Unfortunately, I think the record is behind us. Much of the profits were driven by very low oil prices that we experienced the entire year," said Prentice. "And while fuel prices are still low, (Brent) oil is back up to $60 a barrel and I think it is going to put downward pressure on airline profits and margins in the coming years."

Beyond supply and demand fundamentals, traders were closely eyeing escalating tensions in the Middle East.

"Lebanese Prime Minister Saad Hariri`s resignation and a missile launch by pro-Iran Yemeni Houthis on Riyadh increase the risk of a regional conflict," political risk consultancy Eurasia Group said.

The resignation on Saturday of the Saudi-allied Lebanese prime minister Saad al-Hariri, announced from Riyadh and blamed on Iran and Hezbollah, is seen by many as the first step in an unprecedented Saudi intervention in Lebanese politics.

Saudi air defence forces intercepted a ballistic missile fired towards Riyadh on Sunday. Saudi Arabia accuses arch-foe Iran of supplying missiles and other weapons to Houthi militia in Yemen. Iran denies the charges and blames the war in Yemen on Riyadh.