Strong plunge of 5% in the price of oil after the ‘cold shower’ from China

LAST UPDATE 15:30

Oil contracts are trading at heavy losses after the slowdown in the world’s second largest economy, China, raised new fears about global crude demand.

In particular, his contract Brent October delivery is falling 5.12% or $5 with its price having fallen to $93.12 the barrel.

The American one follows a similar course WTI which sees its own September contract take a dive 5.2% and negotiate at 87.3 dollars the barrel having lost 4.8 dollars today.

In news that appears to weigh on crude positions, China’s economy showed unexpected slowdown trends in July, with industrial activity and retail trade under pressure from the zero-Covid policy.

In particular, industrial production in the country increased by 3.8% in July, slowing from the previous 3.9% growth, but mainly significantly lower than the 4.6% increase expected by analysts.

At the same time, retail sales, which had risen 3.1% in June, rose last month by 2.7% year-on-year, further lagging market forecasts for 5% growth.

Crude prices had rebounded more than 3 percent last week amid production shutdowns at several offshore platforms in the Gulf of Mexico due to a component failure.

With repairs completed on Friday, however, gravity has now returned to levels that will drive demand over the next few months, and as China struggles to cope with the blow to growth brought on by tight pandemic restrictions it appears to have activated re mass sellers.

Additional pressure is on prices from the supply side as the head of the world’s top exporter, Saudi Aramco, said the company is ready to increase output if asked.

In particular, speaking to reporters yesterday Sunday, CEO Amin Nasser said that Saudi Aramco is ready to increase crude oil production to its maximum capacity of 12 million barrels per day if requested by the Saudi government.

“We are confident in our ability to increase to 12 million barrels whenever there is a need or we are asked by the government or the Ministry of Energy,” Nasser said.

According to him, the easing of Covid-19 restrictions in China and activity in the aviation industry may lead to an increase in demand.