Oil Falls After Release of Weak Asian Data

Oil prices fell on Wednesday as weak Chinese and Japanese industrial data triggered the concern of an economic slowdown that could lower oil demand, and as an industry data report showed an increase in US crude stockpiles amid soaring output.

US West Texas Intermediate crude was down 31c, or 0.5%, at $62.70 a barrel by 4.46am GMT, after falling 90c in the previous session.

Brent crude was down 40c, or 0.6%, at $66.23 a barrel. On Tuesday, Brent fell 87c to $66.63.

Traders said oil prices declined on the concern of a slowdown in the global economy after China reported on Wednesday that factory growth in February was at its lowest since July 2016.

China is the world’s second-biggest economy and the biggest importer of oil after overtaking the US last year.

Crude oil demand is highly correlated to economic growth.

While China’s week-long Lunar New Year holiday in February disrupted business activity, traders also pointed to tougher pollution rules that curtailed factory output.

In Japan, the world’s third-largest economy, industrial output in January took its biggest tumble since a devastating earthquake in March 2011, highlighting a weakening in demand and a build up of inventory.

In the US, the world’s biggest oil consumer, rising crude stockpiles weighed on prices.

Data on Tuesday from the American Petroleum Institute (API) showed that crude inventories rose by 933,000 barrels in the week to February 23, to 421.2-million barrels.

Refinery crude runs dropped by 209,000 barrels a day, the API data also showed, implying a drop in demand for feedstock crude. Petrol stocks rose by 1.9-million barrels.

Official data from the US Energy Information Administration (EIA) is due out later on Wednesday.

Soaring US production has pressured oil prices at a time when oil cartel Opec and Russia have reduced output to support prices.

“Climbing US production continues to weigh on the market as traders fear that the Opec output cuts will be nullified by the rising US output,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

US crude oil production has risen by a fifth since mid-2016 to more than 10 million barrels a day.

On Tuesday, International Energy Agency (IEA) executive director Fatih Birol said the US was likely to overtake Russia as the world’s biggest oil producer by 2019.

The US overtook Saudi Arabia, the world’s top crude oil exporter, late last year.

Courtesy : Businesslive