Published By : 01 Sep 2015 | Published By : QYRESEARCH
Prices of oil dropped on Tuesday, surrendering some of the positive gains it had achieved over the past three sessions, as China’s economic worries came up again.
Sweet light crude meant for delivery in October dropped by 4.3 per cent or US$ 2.10 to reach US$ 47.10 per barrel on the New York Mercantile Exchange. The global benchmark Brent fell by 4.2 per cent or US$ 2.26 to reach US$ 51.89 per barrel on ICE Futures Europe.
Private as well as official gauges of the manufacturing activity in China during the month of August dropped to multiple year lows, signaling that there is a persistent contraction of the sluggish economy in China. This sparked worries that the demand for petroleum in China is set to low. China is presently the second largest consumer of oil in the world.
Julian Jessop, heading the commodities research at Capital Economics said that the PMI numbers of China on Tuesday have only reminded citizens of the Chinese story of weakness. In the oil market, however, Julian adds, one has to view the insignificant decline of Tuesday in comparison with the larger highs over the past three days.
Both oil benchmarks – the New York Mercantile Exchange and Brent – increased by over 25 per cent over the last three days, registering the highest three day gains in terms of percentage since 1990 when Kuwait was invaded upon by Iraq.
The rally was supported by a report issued by the Organization of the Petroleum Exporting Countries on Monday, which triggered suspicions that the OPEC would not only take into consideration slashing downward revisions to the oil production information in the US but also output to oil prices on the shore.
After the drop at the start of the previous week, Nymex crude prices presented a sharp rebound to settle at 4.4 per cent up in August. Brent on the other hand, was up 3.7 per cent.