BackBrent crude oil falls below $97 on weak Chinese data, strong dollar
Brent for Nov delivery fell 21 cents to $96.79 a barrel
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London: Brent crude oil fell below $97 a barrel on Monday, moving closer to a two-year low hit last week as weak data from major buyer China and a stronger US dollar added to pressure from heavy supply.
The international benchmark for crude has fallen from $115 in June as geopolitical tension in the Middle East failed to derail oil output, while concerns about slow demand have grown.
Brent for November delivery fell 21 cents to $96.79 a barrel by 1422 GMT. Front-month prices fell to an intra-day low of $95.60 on 24 September, the lowest since July 2012.
US crude, also known as West Texas Intermediate (WTI), slipped 2 cents to $93.52 a barrel after jumping just over $1 on Friday on the back of strong US economic data.
Its discount to Brent narrowed to the smallest in 12 months, touching $3.20 a barrel, before widening back to $3.27 a barrel.
“Traders are primarily focused on macro data this week and the Chinese numbers over the weekend were reasonably bearish, keeping the downtrend in oil intact," said Andrey Kryuchenkov, analyst at VTB Capital in London.
“Oil supplies have not been significantly hit by the violence in Iraq and Syria so far, and the market remains very well supplied," Kryuchenkov added.
Chinese industrial profits fell 0.6% in August from a year earlier, reversing from July’s 13.5% rise, adding to problems such as unsteady exports, a housing downturn and cooling investment growth in the world’s No.2 economy.
Traders were also watching democracy protests in Hong Kong that pose one of the biggest political challenges for China since the Tiananmen Square crackdown 25 years ago.
WTI took some support on Monday from data showing rising incomes helped American consumers spend more in August, the latest sign the US economy may be shifting into a higher gear.
Hedge fund bets on Brent crude have fallen to a two-year low, data from the ICE Exchange showed on Monday. Traders have slashed positions from a record in late June after major supply disruptions in Iraq did not materialise.
The dollar hit a fresh four-year peak against a basket of currencies on Monday, weighing on oil since it makes products priced in the greenback more expensive for buyers using other currencies. The dollar slipped slightly after US equity markets opened lower.
Opec Response?
Iran has urged Opec (Organization of the Petroleum Exporting Countries) members to make coordinated efforts to help stem the decline in oil, but that has highlighted a split with others in the oil producers’ group such as Saudi Arabia who are playing down the price drop.
Analysts at investment bank Morgan Stanley said a sustained price drop below $95 a barrel would be the minimum required to see Saudi Arabia take action, but even then they did not expect to see prices rebound quickly.
“Given the slow response from Opec and the rising crude in storage, an inventory overhang has now developed," Morgan Stanley analysts led by Adam Longson said in a note.
“Typically, any large inventory overhang needs to be worked off before prices rebound, even if fundamentals improve."
Providing some support, a strike has trimmed Libya’s oil output by 25,000 barrels a day to 900,000 bpd, a spokesman for state-run National Oil Corp. (NOC) said on Sunday, but production is still up from a low of 200,000 bpd earlier in the year.
Strength in US gasoline futures has also helped underpin oil prices, as a slate of refinery maintenance shutdowns have seen prices jump by around 6% in the last two weeks. Reuters
James Topham in Tokyo also contributed to this story.
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