Oil prices fell on Monday, weighed down by Asia’s darkening economic prospects and a related strengthening in the US dollar, which makes fuel imports for countries using other currencies more expensive.
Yet, high Middle East tanker charting and strong car sales in China provided some support, traders said.
Brent crude oil futures fell back below $50 per barrel, trading at $49.89 at 0644 GMT, down 65 cents, or 1.29 per cent, from their last settlement.
Brent crude oil futures fell back below $50 per barrel, trading at $49.89 at 0644 GMT, down 65 cents, or 1.29 percent, from their last settlement.
“A strong dollar is helping bring prices down as well as fairly weak data from Asia,” said Matt Stanley of brokerage Freight Investor Services (FIS) in Dubai.
The dollar has recovered 1.2 per cent from June lows against a basket of currencies, pushed by the prospect of a potential hike in US interest rates and concerns over Asia’s economy.
Japan’s business survey index (BSI) of sentiment at large manufacturers stood at minus 11.1 in April-June, compared with minus 7.9 in January-March.
There are also worries about growth in China, largely due to industrial overcapacity and spiralling debt.
With Asia’s economic outlook darkening, oil traders have sold out of long positions which have been profiting from an almost doubling in crude prices since hitting over decade lows earlier this year.
“The crude market currently looks to be facing a stiff test of resistance in the $45-$50 per barrel range. With the US rig count rising again over the last two weeks, this level may cap the crude rally for the moment,” said consultancy Timera Energy.
Despite this, some analysts expect oil demand in Asia and especially China to remain strong.
Vehicle sales in China rose 9.8 per cent to 2.1 million units in May compared with last year, the China Association of Automobile Manufacturers said on Monday, in the strongest monthly growth since December 2015.
In the first five months of 2016, sales grew 7.0 per cent compared with the previous year.
“Against the backdrop of low international oil prices, Chinese crude oil demand will remain well supported this year as demand continues to gain traction from stockpiling activities and refining use,” energy consultancy FGE said.
“We expect Chinese crude oil imports to grow by 730,000-760,00 bpd this year,” it added.
Shipping data supported the view that crude demand remained strong.
“Middle East charting activity remains robust,” said Morgan Stanley.
“During the last four weeks, chartering activity in the region has averaged 9.4 million barrels per day (bpd), nearly the same levels as the prior four weeks,” it added.
Reuters
