Oil futures fell again on Wednesday as worries over the Greek debt crisis and China's stock market turmoil outweighed an expected U.S. inventory drop.
Oil futures fell again on Wednesday as worries over the Greek debt crisis and China’s stock market turmoil outweighed an expected U.S. inventory drop.
China’s stocks tanked further on Wednesday in a deepening crisis in which China’s Securities Finance Corp said it would provide liquidity to ease “panic”, and as over 500 Chinese-listed firms suspended trading.
Front-month U.S. crude futures were down 15 cents at $52.18 per barrel by 0227 GMT. That followed an 8-percent fall between Monday and Tuesday which pulled the contract to levels last seen in April.
Brent crude was 13 cents lower at $56.72 a barrel, following an almost 6-percent drop between Monday and Tuesday.
“Volatility in crude oil prices has increased dramatically in July, up by 40 percent in the last six trading days. Funds are contributing to the sell-off, with (U.S.) speculators reducing net-long position in WTI oil by 8 percent in the latest week,” ANZ said.
China’s CSI300 index has lost a third of its value since June in the steepest downward correction since the global crisis in 2008, forcing China’s central bank to say it would support stability in the stock market and guard against systemic and regional financial risks.
Consumer demand in China could stall if the stock market crisis continues, hitting commodity consumption.
“The stock market crash doesn’t bode well for the (Chinese) economy. If your stock market account is shredded, you won’t buy your white goods,” said Ed Meir at INTL FCStone.
HSBC on Wednesday cut its 2015 growth outlook for Asia excluding Japan to 6.3 percent from 6.5 percent.
“Things aren’t exactly going according to plan. The sharp drop in crude prices, policy easing and stabilising demand … were supposed to give Asia a little breather over the last couple of quarters. Instead, local demand – whether construction in China, auto sales in Indonesia or real estate transactions in Taiwan – continues to slow,” it said.
“Asia’s export malaise is not just a temporary blip, but reflects longer-lasting structural factors, with a trade rebound unlikely.”
Greece’s debt crisis has also dragged on commodities. Creditors have given Athens until the end of the week to come up with reform proposals in return for loans that will keep the country from crashing out of the euro.
The oil price falls came despite an expected draw in U.S. inventories.
A Reuters poll flagged a 700,000-barrel decline in stocks, while the American Petroleum Institute (API) estimated an almost 960,000-barrel drop. Government data will be published on Wednesday.