Oil prices ended lower to end an impressive three session straight rally that saw the major benchmarks surge by more than 25%, on growing concerns over Chinese economic growth
Light sweet crude for October delivery fell by $3.79 or 7.7% to end at $45.51 a barrel on the New York Mercantile Exchange. Prices gave back most of the 8.8% they had gained during the previous session.
Brent Futures, the global benchmark, slipped by $4.59 or 8.5% to end at $49.56 a barrel on the London Based ICE Futures Exchange, its largest one day decline since May 2011.
“China’s been a concern over the past several months for a lot of money managers out there in the marketplace,” Oliver Sloup, director of managed futures at brokerage iiTrader, told the Wall Street Journal
Data from China on Tuesday showed that the official Chinese Manufacturing Purchasing manager’s index for August slumped to a three year low underlining concerns over the economy of the world’s biggest energy consumer.
Crude prices have been volatile for the recent past on continued worries over the outlook for demand but surged in the last three sessions as bearish traders rushed to cash in short positions.
Some investors however worried that the three day 25% surge, the biggest three day growth since the 1990 Iraq Invasion of Kuwait, was overdone due to the persistence of the global glut.
“The oil drop is normal technical selling and not a surprise after three days of big gains. Short-term momentum swing traders would want to step out at some point.” Colin Cieszynski, chief market strategist at CMC Markets, told Market Watch.
“This week’s U.S. petroleum-supply data from the American Petroleum Institute late Tuesday and from the Energy Information Administration early Wednesday could be interesting and may spark more action.”
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