Oil Prices Slide to 6½-Year Low
Concern about Chinese demand after yuan’s devaluation pressures crude prices
Crude-oil futures on the New York Mercantile Exchange dropped to a more-than six-year low Friday on escalating concerns about demand from China following the yuan’s devaluation.
Nymex oil futures for delivery in September hit a low of $41.35 a barrel, a level seen last on March 4, 2009.
“Everybody is worried that the yuan devaluation may curb China’s demand,” said Gnanasekar Thiagarajan, director of Commtrendz Risk Management.
China’s oil-import demand has been robust, but a stream of negative economic data points to slowing industrial and economic growth.
Investors are worried that Chinese demand for oil will drop, since a weakened yuan makes imports more expensive.
While concerns about China’s economy have triggered the latest leg of weakness in oil prices, the primary factor pressuring the market is a glut of supplies.
Earlier in the week, U.S. crude-oil stockpiles declined for the third-straight week, though the extent of the drop was below market expectations.
Daniel Hynes, analyst with ANZ Bank, said there were concerns U.S. oil inventories would start building up again with the closure of a refinery that produces 240,000 barrels a day.
Still, there have been few signs of oil supplies easing, with large producers such as Saudi Arabia, Iraq or U.S. shale-oil companies refusing to cut output.
“The lowest crude prices in six years might not be enough to put the brakes on the U.S. supply growth,” an ANZ report said. “U.S. shale players are actively cutting cost and some players are profitable at less than $30 per barrel.”
Nymex light, sweet crude futures for delivery in September traded at $42.05 a barrel recently, down 18 cents in the Globex electronic session. Brent crude on London’s ICE Futures exchange fell by one cent to $49.23 a barrel.
Source: WSJ – Oil Prices Slide to 6½-Year Low
