Oil Drops $1 on Chinese Economy Concerns

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Oil Drops $1 on Chinese Economy Concerns

Oil prices for Brent crude dropped below $49 per barrel and the US crude dropped more than $81 on Monday after the darkening of the global economic outlook and Iraq announcing its record production of oil.

China, the largest consumer of energy in the world, is facing a downward pressure on the economy. China is this week expected to report its growth slowing to 7.2% from last year, the weakest since the last global economic crisis. The China’s National Bureau of Statistics released data on Sunday showing that prices of houses dropped for the fourth straight month.

According to Reuters, Brent crude was trading at $49.15 per barrel, down $1.02 after dropping earlier to a $48.88 session low. US crude dropped to $47.67 per barrel by $1.02.

Prices of oil have dropped by more than half from June last year with the demand slowing and the global output soaring. Last week, the International Energy Agency (IEA) said that there is a possibility of a reversal in the trend this year, adding that there might be further decline in the prices before they rise.

Energy economist at ABN Amro, Hans van Cleef said, “There’s still more supply than demand and that’s a situation that will not change in just a few weeks.”

Bloomberg quoted Christopher Bellew, Jeffries International Ltd. senior broker as having said, “With supply exceeding demand it still seems highly likely that the market will fall further. Rallies above $50 have proved very short-lived and my expectation is for the price to move in a sideways range until the next move to the downside, which I expect to take the price to $40 or lower.”

Iran’s oil minister, Bijan Zanganeh said that consultations with the other Organization of the Petroleum Exporting Countries members to stop the prices of oil from falling more are yet to bear fruits. Zanganeh said, “Even if the oil price goes down to a $25 per barrel, the oil industry will not be threatened.”

To contact the reporter of the story: Jonathan Millet at john@forexminute.com