SINGAPORE, Sept 15 (Reuters) – Brent crude slumped to a more than two-year low under $97 per barrel on Monday as a slew of lacklustre economic data from China, the world’s top energy consumer, cast a shadow on the outlook for oil demand amid abundant global supplies.
Analysts have warned of a potential hard landing at the world’s No.2 economy after the country’s factory output grew at its slowest pace in nearly six years last month, stoking fears of lower oil demand growth in the key consumer. (Full Story)
October Brent LCOc1, which expires on Monday, fell to as low as $96.21 a barrel, the lowest since July 2, 2012. The contract recovered to $96.57 by 0411 GMT, down 54 cents. November Brent LCOc2 was down around 49 cents at $97.47.
U.S. crude CLc1 was at $91.27 a barrel, down $1, after slipping earlier to $90.63 – near a 16-month low of $90.43 hit last week.
“Obviously economic growth in China is one of the key drivers of world growth and generally of oil demand,” Ric Spooner, chief market analyst of CMC Markets in Sydney said.
“As it currently stands, it seems likely that the (oil) demand growth won’t keep up with the growth in supply capacity.”
The Chinese data, which includes a drop in power generation for the first time in four years, came on the heels of downward revisions in 2014-2015 global oil demand growth by the International Energy Agency last week. (Full Story)
On the supply front, Libya’s oil production is expected to rise to 1 million barrels a day in October.
Gulf delegates attending a meeting of oil ministers from the region said the price drop was unlikely to spur action from the Organization of the Petroleum Exporting Countries (OPEC) unless crude fell below $85 a barrel. (Full Story) (Full Story)
A rally in the U.S. dollar against major currencies has also taken some shine off oil while investors will be closely watching the meeting of the Federal Open Market Committee later this week for clues on when the U.S will raise interest rates.
A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies. (Full Story)
GEOPOLITICAL TENSIONS EYED
Ample supplies and weak demand have hit oil prices in recent weeks, but investors continue to keep an eye on geopolitical tensions for indications of any new threat to supply.
“If we see anything that’s a significant threat to Iraqi supply, or threat to the moving of oil and gas to Ukraine, then we could see a larger than normal upside reaction,” Spooner said.
U.S and EU imposed fresh sanctions on Moscow last week, not only bringing an abrupt halt to exploration of Russia’s huge Arctic and shale oil reserves but also setting rules on tougher financing of existing Russian projects.
Washington has also garnered support from several countries in the Gulf and Australia to build a coalition to counter Islamic State militants who have grabbed swathes of territories across Syria and Iraq. (Full Story)