Crude oil and Brent oil reversed Friday’s gains to trade in the red on Monday morning. WTI oil fell 56 cents to 42.55 while Brent oil eased by 9 cents to
Also, prices were under pressure as data showing a big rise in key U.S. stockpiles intensified worries over a growing global glut. A rise in the dollar, after news of higher U.S. retail sales in July and strengthening employment data, added to the weight on oil. However, sharp losses were cushioned due to a rally in U.S. gasoline and diesel due to a refinery outage helped crude futures. The US dollar began to rally in the Asian session adding 17 points to 96.78.
Reuter’s said that volatility in Chinese markets may have more impact than expected on the euro zone’s fragile economy, and an increase in U.S. interest rates might also slow its recovery, the European Central Bank said in the minutes of its last meeting. Economic recovery in the 19-member euro zone was moderate and gradual, a trend the ECB called “disappointing”. Real GDP remained near 2008 levels, while the U.S. economy has rebounded significantly, the ECB said in the minutes, released on Thursday.
If China’s primary intention is to win its exporters a more competitive position then this looks to be the start of an extended bout of weakness for the yuan. If, instead, China is trying to lay the groundwork for a more open financial system without setting off a deluge of capital flight then it will keep a tighter hold on the currency’s movement.
Oil prices fell to near six-year lows on Monday as Japan’s economy contracted and producers in the United States added drilling rigs for a fourth straight week despite a recent rout in prices. Japan’s economy, the second biggest in Asia and No.3 in the world, shrank in the second quarter from a year earlier, adding to fears that slowdowns in Asia’s biggest economies will weigh on oil demand.
The increase likely reflected how a period of stable prices earlier this summer, when U.S. oil traded above $US60 a barrel, lulled some firms into stepping up spending.
“The recent recovery in the oil rig count supports our expectation that U.S. producers can and will ramp up activity with WTI prices near $US60 a barrel, given improved returns with costs down 30 per cent,” analysts at Goldman Sachs said in a note to clients.
Citigroup lowered its crude oil price outlook citing weak market fundamentals, including an increased supply from OPEC and challenging demand growth in China and emerging markets.