CANBERRA: Oil prices dropped on Monday in the wake of a sharp fall in industrial profits in China, the latest sign of weakness in the world’s largest energy consumer.
US benchmark West Texas Intermediate for delivery in November slid $1.27 to $44.43 a barrel on the New York Mercantile Exchange. Brent North Sea crude for November delivery dropped to $47.34 a barrel in London, down $1.26 from Friday’s settlement.
“The market is very volatile but it hasn’t been just crude oil, it’s across the board. Minerals are taking it on the chin as well as the stock market, which is putting a lot of pressure on commodities,” said Oliver Sloup of iiTrader.com.
Sloup said the latest weak data from China amid faltering growth was a driver of the sell-off. Profits at China’s major industrial companies fell almost nine percent in August from a year ago, the biggest decline since 2011, official data showed Monday.
“China is one of the biggest consumers of crude oil and if they’re slowing down there’s not going to be anyone really stepping up to fill those shoes in the near future,” he said. “If they continue to slow, expect that to continue to put pressure on prices.”
The oil market also reflected worries more generally about global growth, analysts said. Christine Lagarde, the chief of the International Monetary Fund, said the IMF would likely lower its growth forecasts for 2015 and 2016 because of the slowdown in China and other emerging markets.
In an interview with French business newspaper Les Echos published Monday, Lagarde said the July estimates of 3.3 percent growth for 2015 and 3.8 percent for 2016 was no longer realistic. But she said growth would remain above 3.0 percent.
“Lagarde basically said she was going to lower the growth for the entire universe and that’s kind of weighing on the expectation” for crude-oil demand, said Phil Flynn at Price Futures Group. The IMF will release its new growth projections on October 6.
