Oil prices tumbled as Chinese demand hit new lows due to weak economic conditions.
“At present, our country’s economic growth rate remains within the target range set earlier this year and we are seeing the effectiveness of stabilisation policies,” Premier Wen Jiabao said in his speech. He also added that difficulties may persist for a while.
Futures dipped as much as 0.6% in New York for the first time in four days. Abu Dhabi started exporting its first crude order through a pipeline that bypasses the Strait of Hormuz amid threats made by Iran to close the strategic passageway from where about one fifth of the world’s oil cargo passes.
Victor Shum, the managing director of IHS Consulting in Singapore said: “News that this Abu Dhabi pipeline is in operation certainly helps relieve some of the worries over tanker blockage at the Strait of Hormuz.”
Oil for August delivery dropped by 52 cents to $86.58 a barrel in electronic trading on the New York Mercantile Exchange. However, the contract gained 1.2 % to $87.10 on 13 July, the highest since 5 July. Prices are 12% lower this year.
Brent crude for August settlement was pegged at $102.30 a barrel on the London-based ICE Futures Europe exchange. The more-active September future was at $101.12 again went down by 30 cents. The European benchmark’s premium to West Texas Intermediate was at $15.54, from $15.30 on July 13.
According to data compiled by Bloomberg, the New York Stock Oil showed signs of weak trading in futures as it approached a “death cross” technical formation. The 100-day moving average, at $96.16 a barrel on Tuesday, has almost erased a premium to the 200-day mean at $96.07. Investors typically sell contracts when a shorter moving average falls below the longer one. Crude has resistance along the 50-day average at $87.18, while hedge funds ignored bullish oil wagers and money managers reduced their net-long positions by 5.1%.
China’s data showed the weakest expansion in three years following Europe’s fiscal crisis. The export rate dropped and a crackdown on property speculation curbed domestic demand. However, the pace of economic expansion is within the targeted range and government have taken adequate measures to stabilize growth, said Wen.
China’s outbound direct investment (ODI) in the non-financial sector has hit 35.42 billion U.S. dollars in the first half of 2012, up 48.2% year on year said the Ministry of Commerce (MOC) announced on Tuesday. Total ODI in the non-financial sector amounted to 357.5 billion U.S. dollars by the end of June, according to MOC spokesman Shen Danyang.
China also attracted 12 billion U.S. dollars in foreign direct investment (FDI) in June, which is 6.9% compared to previous year. However, global investment remained inactive in 2012 because of a lackluster world economy, explained the spokesman.