Oil dives 5 percent to six-month low under $50 on China worry

Mon Aug 3, 2015 4:21pm EDT
 
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices lurched 5 percent lower on Monday to their lowest since January, taking global benchmark Brent below $50 a barrel as weak factory activity in China deepened a commodity-wide rout.

Growing concerns over excess global oil supplies, heavy selling in pumped-up gasoline futures and technically driven momentum trading knocked prices to within a few dollars of the six-year lows touched at the start of this year.

U.S. crude had already fallen 21 percent in July, its worst month since 2008 amid mounting evidence of an expanding global glut and a stock market collapse in China, the world's largest energy consumer.

On Monday, the rout deepened after data showed Chinese manufacturing growth unexpectedly stalled in July and U.S. consumer spending advanced at its slowest pace in four months in June as demand for automobiles softened.

Brent LCOc1, the global benchmark for crude, settled down $2.69, or 5.2 percent, at $49.52 a barrel. Brent's session bottom of $49.36 was within striking range of its 2015 low of $49.19.

U.S. crude CLc1 settled down $1.95, or 4.1 percent, at $45.17, just about $3 above its 2015 bottom.

"Economic weakness has set the tone," said Matt Smith, director of commodity research at ClipperData, a New York-based energy database.

"But the gasoline crack spread is also unraveling," Smith said, referring to the difference between gasoline and U.S. crude prices, which sets the profit margin for refiners.   Continued...

 
A customer holds a nozzle to fill up his tank in a gasoline station in Nice December 5, 2014.  REUTERS/Eric Gaillard