Crude prices pared early morning losses but still closed lower on concerns on risk of lower demand from China as concerns over its economy and markets persisted.
Light crude oil for August delivery settled 20 cents or 0.4% lower at $52.33 a barrel on the New York Mercantile Exchange. The contract had, earlier in the day sunk to lows of $51 a barrel.
Based on the most active contracts, this is the lowest the US benchmark has traded in more than 3 months after slipping 7.7% on Monday.
Brent for August delivery, the global benchmark, edged up 31 cents or 0.6% to settle at $56.85 a barrel on the London based ICE Futures exchange.
“There has been a lot of money looking to pile into the short-side, and there have been an accumulation of different triggers to cue that over a short time,” Paul Horsnell, head of commodities research at Standard Chartered in London, told Reuters.
“None of those work in isolation, but put them all together in a short period and they’ll do it. And after that, the technicals kick in to give a further push down.”
Also weighing on crude prices were worries that a potential agreement between Iran and the world powers over the curtailment of its nuclear program would lift economic sanctions against the Islamic country worsening the oil glut.
Oil prices were, however, more stable on Tuesday after the selloff on Monday which most analysts said was an overreaction to short term factors.
“Oil markets overreacted Monday, and near-term demand is too firm to describe a collapse in demand,” Richard Hastings, macro strategist at Global Hunter Securities, told Market Watch in a phone conversation.
“The widespread ideas that China’s stock-market wreck is about total demand in China isn’t the case. However, the bears are in charge right now, and the upside for prices is looking tough,” he said.
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