Oil prices ease on US, China concerns

24th June 2013, Comments 0 comments

Oil prices dropped slightly on Monday as traders focused on economic stimulus concerns surrounding the United States and China, the world's two biggest consumers of crude.

Brent North Sea crude for delivery in August shed 19 cents to stand at $100.72 per barrel in London afternoon deals.

New York's main contract, West Texas Intermediate light sweet crude for August, was down 14 cents at $93.55 a barrel.

"A firmer US dollar, rising US bond yields and falling Asian equity markets are continuing to put pressure on crude oil prices as the new week of trading begins," said Commerzbank analyst Carsten Fritsch.

European stock markets also fell further on Monday, hit by concern over the withdrawal of US Federal Reserve stimulus and the emergence of a liquidity crisis in China, dealers said.

Global stock markets had already slumped last week after the US Federal Reserve had signalled that it might begin winding down its massive bond-buying policy, known as quantitative easing (QE).

A crisis in the Chinese banking system, which has caused lenders to put the brakes on loans, was adding to the pressure on oil prices.

The rates banks charge to borrow from each other has surged in the past two weeks but the People's Bank of China has refrained from injecting more cash -- owing to fears about a growth of bad debt.

Prospects that Beijing would step in to provide money were dashed at the weekend when a commentary by the official Xinhua news agency said there was no shortage of funds in the financial system.

The oil market had meanwhile last week joined a global sell-off in stocks and gold last week in response to Fed chairman Ben Bernanke's comments that the US central bank could begin to wind down its $85 billion-a-month bond purchases if the economy continues to improve.

Investors' trepidation over the US commerce department's third estimate of US gross domestic product (GDP) in the first quarter of 2013 was also weighing on the crude market, according to analysts.

The figures will be released on Wednesday.

"There is some concern that if there is a revision of the estimates upwards, it might suggest that the US Fed will taper off its stimulus programme sooner," Jason Hughes, head of sales trading at CMC Markets in Singapore, told AFP.

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© 2013 AFP

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