Crude Oil Trading Causes Commodity to Depreciate amid China Growth Concerns
January 22, 2014 6:15 am
Crude oil trading resulted in the commodity falling in price on Jan. 20, as global market participants responded to data pointing to lackluster economic conditions in China.
February U.S. crude futures reached $93.70 per barrel during the day on the New York Mercantile Exchange, according to The Associated Press. In addition, March Brent crude contracts trading on the London-based ICE Futures exchange were 20 cents lower at $106.28 a barrel.
It is also important to note that while the price of the commodity fell on Jan. 20, investment managers have recently become less bullish in their predictions for the raw material, according to data provided by London-based exchange ICE Futures Europe and reported by Bloomberg.
Figures provided by the bourse in its Commitments of Traders report revealed that during the week that ended on Jan. 14, combined bets that Brent crude will rise in price dropped by 14 percent, according to the news source. However, even after this decline in bullish wagers, net long positions were still greater than bets that the commodity will fall in value.
Both the decline in price, and also the drop in wagers being made that the commodity will be pushed higher as a result of crude oil trading, were made at a time when there are concerns about China’s demand for the key energy source, Reuters reported.
Concerns about demand in China
Calculations conducted by the media outlet harnessing preliminary government data revealed that in 2013, implied demand for oil increased by a meager 150,000 barrels per day. As a result, this key measure rose only 1.6 percent year-over-year. Such figures may be of interest to those who trade the raw material, since China is the world’s second-largest consumer of oil.
“The long term oil demand trend is certainly not what it used to be,” Alex Yap, who works for Facts Global Energy as an oil analyst, told the news source. “But I think 2014 could be better with new refineries starting and Strategic Petroleum Reserve stockpiling.”
China economic growth slows
In addition to this report on the Asian nation’s demand for the energy source, separate data was released, which helped paint a picture of deteriorating business conditions in China, according to AP. Figures revealed that during the final quarter of last year, gross domestic product grew at an annualized rate of 7.7 percent, which was slower than the prior period.
“The modest Chinese economic data weighed on market sentiment … adding pressure to crude oil prices,” analysts at international derivatives broker Sucden Financial Research wrote in a note to clients, the media outlet reported.
While these particular market experts asserted that the figures released for the Asian nation would help push the price of the commodity lower, not everyone was negative in their interpretation of the data, as Ben Le Brun, who works for OptionsXpress in Sydney as a market analyst, provided a more optimistic view of the figures, according to Reuters.
It is important to note that while China’s GDP grew a bit more slowly during the fourth quarter than it did during the prior three months, the 7.7 percent rate was higher than the 7.6 percent that as predicted by the broader market, the media outlet reported.
“The data is a cause for relief, as it eases some of the fears over the Chinese economy,” he told the news source.
Global supply concerns
Another factor that has been noted as providing downward pressure for oil prices is hopes that the global supply of the energy source could rise soon if key areas such as facilities in Libya start producing once again, according to AP. The production if oil could receive a boost in the event that crucial locations in the Eastern section of the African nation fall into the hands of government officials. Thus far, these key areas have been hindered by rebel activity.
“The prospect of a growing oil supply is continuing to weigh on prices,” major financial services firm Commerzbank wrote in a research note, the media outlet reported. “Any seizure of the oil terminals by force would mean escalating the crisis and make it more difficult – if not impossible – to find any permanent solution to it.”
Global supply could also be bolstered in the event that the removal of economic sanctions allows the Iranian production of oil to operate at its full potential, according to Reuters. During the last 18 months, the amount of the raw material contributed by the Western Asian nation has plunged by more than 50 percent, falling to 1 million barrels per day.
However, the amount of oil supplied by the country could potentially move far higher, at least if the information contained in a United Nations report obtained by the media outlet is accurate. This document indicated that nuclear activity in Iran has ceased for the most part. If the current economic sanctions that were previously imposed because of these activities are lifted, it could have a significant impact on crude oil trading.
Crude oil trading resulted in the commodity falling in price on Jan. 20, as global market participants responded to data pointing to lackluster economic conditions in China.
February U.S. crude futures reached $93.70 per barrel during the day on the New York Mercantile Exchange, according to The Associated Press. In addition, March Brent crude contracts trading on the London-based ICE Futures exchange were 20 cents lower at $106.28 a barrel.
It is also important to note that while the price of the commodity fell on Jan. 20, investment managers have recently become less bullish in their predictions for the raw material, according to data provided by London-based exchange ICE Futures Europe and reported by Bloomberg.
Figures provided by the bourse in its Commitments of Traders report revealed that during the week that ended on Jan. 14, combined bets that Brent crude will rise in price dropped by 14 percent, according to the news source. However, even after this decline in bullish wagers, net long positions were still greater than bets that the commodity will fall in value.
Both the decline in price, and also the drop in wagers being made that the commodity will be pushed higher as a result of crude oil trading, were made at a time when there are concerns about China’s demand for the key energy source, Reuters reported.
Concerns about demand in China
Calculations conducted by the media outlet harnessing preliminary government data revealed that in 2013, implied demand for oil increased by a meager 150,000 barrels per day. As a result, this key measure rose only 1.6 percent year-over-year. Such figures may be of interest to those who trade the raw material, since China is the world’s second-largest consumer of oil.
“The long term oil demand trend is certainly not what it used to be,” Alex Yap, who works for Facts Global Energy as an oil analyst, told the news source. “But I think 2014 could be better with new refineries starting and Strategic Petroleum Reserve stockpiling.”
China economic growth slows
In addition to this report on the Asian nation’s demand for the energy source, separate data was released, which helped paint a picture of deteriorating business conditions in China, according to AP. Figures revealed that during the final quarter of last year, gross domestic product grew at an annualized rate of 7.7 percent, which was slower than the prior period.
“The modest Chinese economic data weighed on market sentiment … adding pressure to crude oil prices,” analysts at international derivatives broker Sucden Financial Research wrote in a note to clients, the media outlet reported.
While these particular market experts asserted that the figures released for the Asian nation would help push the price of the commodity lower, not everyone was negative in their interpretation of the data, as Ben Le Brun, who works for OptionsXpress in Sydney as a market analyst, provided a more optimistic view of the figures, according to Reuters.
It is important to note that while China’s GDP grew a bit more slowly during the fourth quarter than it did during the prior three months, the 7.7 percent rate was higher than the 7.6 percent that as predicted by the broader market, the media outlet reported.
“The data is a cause for relief, as it eases some of the fears over the Chinese economy,” he told the news source.
Global supply concerns
Another factor that has been noted as providing downward pressure for oil prices is hopes that the global supply of the energy source could rise soon if key areas such as facilities in Libya start producing once again, according to AP. The production if oil could receive a boost in the event that crucial locations in the Eastern section of the African nation fall into the hands of government officials. Thus far, these key areas have been hindered by rebel activity.
“The prospect of a growing oil supply is continuing to weigh on prices,” major financial services firm Commerzbank wrote in a research note, the media outlet reported. “Any seizure of the oil terminals by force would mean escalating the crisis and make it more difficult – if not impossible – to find any permanent solution to it.”
Global supply could also be bolstered in the event that the removal of economic sanctions allows the Iranian production of oil to operate at its full potential, according to Reuters. During the last 18 months, the amount of the raw material contributed by the Western Asian nation has plunged by more than 50 percent, falling to 1 million barrels per day.
However, the amount of oil supplied by the country could potentially move far higher, at least if the information contained in a United Nations report obtained by the media outlet is accurate. This document indicated that nuclear activity in Iran has ceased for the most part. If the current economic sanctions that were previously imposed because of these activities are lifted, it could have a significant impact on crude oil trading.
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