China Falls Oil Follows, It’s Not Over Yet
China’s main indexes closed down on Monday as investors sold shares in the aftermath of a four-day market holiday, during which further restrictions on futures trading were announced.
Brent crude for October was down 90 cents at $48.71 a barrel by 1440 GMT, having reached an intraday low of $48.42. U.S. crude for October was down 75 cents at $45.30, having reached an intraday low of $48.42.
Oil has fallen almost 60 percent since June 2014 on a global supply glut, with prices seesawing in recent weeks as concerns about a slowing Chinese economy caused turmoil in global stock markets.
“For commodities, the key demand-side figure to care about is not China’s GDP growing at 7 percent instead of 9 or 10 percent, it is the manufacturing price index, which has been falling for more than 40 months in a row,” JBC Energy said.
High supply will be swelled further from the North Sea, where crude oil output tracked by Reuters will rise to its highest in just over two years in October, according to loading schedules, adding to ample Atlantic Basin crude supplies.
The dollar has strengthened since late August and this has also hurt oil prices by making the commodity more expensive for holders of other currencies.
The year-long decline in oil prices caused more than 5,000 job losses in Britain’s North Sea oil and gas sector since late last year, the country’s Oil and Gas Authority said on Monday.
Investors are awaiting euro zone second-quarter gross domestic product figures on Tuesday, followed by monthly global oil supply and demand data from U.S. and global energy authorities to give oil further direction.
More to Come
China’s foreign exchange reserves posted their biggest monthly fall on record in August, reflecting Beijing’s attempts to halt a slide in the yuan and stabilize financial markets following its surprise move to devalue the currency last month.
China’s reserves, the world’s largest, fell by $93.9 billion last month to $3.557 trillion, central bank data showed on Monday.
The drop left market watchers questioning how sustainable China’s efforts to support the yuan are, as capital flows out of the country due to fears of an economic slowdown and prospects of rising U.S. interest rates.
ADVERTISING
“Frequent intervention will burn foreign reserves rapidly and tighten the onshore market liquidity,” said Zhou Hao, senior economist at Commerzbank in Singapore.
The offshore yuan weakened following the data release to trade at a record discount to the onshore rate, suggesting investors believe the official rate is being kept too high.
There was relief, though, that the dip in reserves had not been larger, with some commentators predicting in the run-up to the announcement that the drop could be as much as $200 billion.
The decline in reserves has quickened following China’s near 2 percent devaluation of the yuan on Aug. 11, which stoked fresh concerns about the economy and heavy selling of the currency.
China was so surprised by the reaction to the devaluation that it is likely to keep the yuan on a tight leash in the near-term to head off fears of a global currency war, policy insiders have told Reuters.
The post China Falls Oil Follows, It’s Not Over Yet appeared first on Live Trading News.