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Oil drops on China, US economy concerns

Oil drops on China, US economy concerns
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First Published: Mon, Jul 11 2011. 11 52 AM IST
Updated: Mon, Jul 11 2011. 11 52 AM IST
Singapore: Oil fell for a second day on Monday after a drop in China’s crude imports and disappointing US employment data rekindled concerns of a demand slowdown at the world’s top two energy consumers.
Worries that the sovereign debt crisis in Europe may spread to Italy, the region’s third largest economy, also made investors edgy, keeping them away from risky assets.
Brent crude for August slid 62 cents to $117.71 a barrel at 11:38am, still less than $10 from this year’s peak above $127, while US crude benchmark West Texas Intermediate (WTI) shed 60 cents to $95.60.
China’s crude imports tumbled by 11.5% in June from a year earlier to 4.8 million barrels per day (bpd), their lowest in eight months.
Fears that Beijing may raise interest rates further to contain the fastest inflation in three years dampened risk appetite, said Ben Le Brun, market analyst with CMC Markets.
Brent on Friday dipped 0.2% after data showed US jobs growth ground to a near halt in June as employers hired the fewest workers in nine months.
“It’s a combination of both pieces of news, the world’s two biggest consumers with not good economic data,” Le Brun said from Sydney.
“The drop in China’s imports probably has to do with the tightening of rates in the past six to 12 months and the US jobs report was a very bad miss. Considering all the headwinds that we have had recently, the market has held quite well.”
Reduced loadings of North Sea crude were also supportive for Brent on Friday, while front-month WTI plunged by almost $2.50.
WTI’s discount to Brent hovered close to $22 on Monday after it widened to as much as $22.45 in the previous session, the highest since the intraday record of $23.34 hit on 15 June, on news that output from the North Sea Forties oil stream will slip to a two-year low in August.
Last week’s gains in Brent pushed prices well above the level prior to the release of global emergency stockpiles coordinated by the International Energy Agency, as traders bet the extra 60 million barrels of oil would be insufficient to stop markets tightening later this year.
Iran’s caretaker oil minister said on Saturday that Opec was opposed to any increase in output ceilings in the absence of “well-studied justifications”.
Money managers raised their net-long US crude futures and options positions in the week to Tuesday, the Commodity Futures Trading Commission said on Friday.
In the currency market, the euro fell to fresh two-week lows versus the Swiss franc and US dollar in Asia on Monday in the lead-up to an emergency meeting among European leaders.
European Council president Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy.
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First Published: Mon, Jul 11 2011. 11 52 AM IST
More Topics: Oil | Crude | Markets | Commodity | ICE Brent |