By Eric Yep
Oil prices tumbled to fresh lows in Asian trade Monday, in line with the selloff in wider financial markets, as investors were shaken by the rout in Chinese equity markets and worries about global economic growth.
Brent crude, the global oil price benchmark, dropped below the $45 a barrel mark for the first time since March 2009. It is now trading around 56% lower from its year-high of $103.19 a barrel reached in August last year.
Oil prices have been under pressure for several months due to oversupply concerns, but the slump deepened in recent weeks on fears of a sharp slowdown in the Chinese economy and its impact on global markets. The recent devaluation of the yuan also added to market uncertainly, stoking concerns that China's oil and commodities imports could fall further.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at $39.70 a barrel at 0203 GMT, down $0.75 in the Globex electronic session. October Brent crude on London's ICE Futures exchange fell $0.73 to $44.73 a barrel.
Equity markets in China were sharply lower again Monday, wiping out all of this year's gains, following a sharp decline in global equity markets last week. The Shanghai Composite Index was over 8% lower in morning trade.
China is the world's largest consumer of commodities, and second-largest consumer of oil.
Its demand for most commodities has fallen sharply since the world's second-largest economy started showing signs of slowing growth. But its demand for oil has held up much stronger than other commodities, helped by stockpiling. A collapse in Chinese oil imports would be catastrophic for the oil market, where prices are already low.
"Despite poor headline macro data, most China oil demand data points remain resilient in China through July," Adam Longson, head of commodity research at Morgan Stanley said. China's crude-oil imports in July rose 1.7 million barrels a day from a year earlier to 7.4 million barrels a day, near record levels.
Oversupply remains the overarching factor weighing global crude prices with record oil production from key producers like Saudi Arabia and expectations of higher Iranian oil exports on the back of its recent nuclear deal.
Nymex oil futures were trading below the $40 a barrel mark, the lowest in nearly six and a half years, in Asian trade Monday. U.S. oil prices are being dragged lower as its shale-oil producers remain surprisingly resilient in the face of low oil prices. The latest U.S. oil rig-count rose by 2 to 674, according to oil consulting firm Baker Hughes.
Most market participants are still of the view that the latest fall in oil prices is being driven by negative market sentiment and is overdone from a supply-demand perspective. "While oil fundamentals aren't strong, physical markets do not corroborate the substantial weakness" in the current front-month contract price, Mr. Longson said.
But the oil market is still struggling to find a near-term upside for prices.
"Global growth concerns, coupled with the onset of refinery maintenance season, means oil prices may remain under pressure in the absence of a firm bullish catalyst," Societe Generale said in a weekend note.
Nymex reformulated gasoline blendstock for September--the benchmark gasoline contract--fell 18 points to $1.5431 a gallon, while September diesel traded at $1.4460, 164 points lower.
ICE gasoil for September changed hands at $439.75 a metric ton, down $3.00 from Friday's settlement.
Write to Eric Yep at firstname.lastname@example.org
(END) Dow Jones Newswires
August 23, 2015 23:52 ET (03:52 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.