Energy Commodities Price Watch: Brent Slips below $104 on Fears of China Slowdown

on Jun 20, 2013

The Brent price has declined today, June 20, with investors focusing on lacklustre economic data from China and on the US Federal Reserve’s plan to start reducing bond purchases later this year. West Texas Intermediate (WTI) has also lost ground, pressured by the prospects of Fed tapering as well as by a report indicating a rise in US crude inventories. The natural gas price has declined, snapping three days of gains.

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**WTI Price Retreats**
WTI futures for July delivery, due to expire today, dropped $2.24 to $96 a barrel in electronic trading on the NYMEX. The WTI oil price fell 20 cents to $98.24 yesterday. Futures took a hit with the Fed Chairman Ben Bernanke saying yesterday that the US economy was expanding strongly enough for the US central bank to start slowing the pace of its quantitative easing programme later this year.

“The change in policy from the Fed and rising supplies are weighing on the market,” Bloomberg quoted Jonathan Barratt, the chief executive officer of commodity newsletter Barratt’s Bulletin, as saying. “The Fed tapering implies that the economy is going well and that demand will be there. When you look at what inventories are actually doing, it’s not that good.”

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US crude inventories rose by 313,000 barrels last week, in contrast to the 500,000 barrel drop forecast by analysts.
**Prospects of China Slowdown Weigh on Brent Price**
Brent crude for settlement in August lost as much as $2.29, or 2.2 percent, to $103.83 a barrel on the ICE Futures Europe exchange. The Brent oil price declined with the preliminary purchasing managers’ index for China released by HSBC Holdings Plc and Markit Economics indicating that Chinese manufacturing was shrinking at a faster pace in June.

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“It’s not surprising that oil is lower when you look at the rubbish Chinese PMI data from last night,” Michael Hewson, market analyst for CMC Markets Plc, told Bloomberg. “Added to that you have Mr Bernanke’s stimulus withdrawal that may affect growth in the US, and these two factors are enough to pull down prices.”

Reuters quoted Commerzbank analyst Carsten Fritsch as pointing out that the oil price had “inevitably failed to escape the present climate” and had “come under strong pressure”.
“Supply-side risks, which have pushed oil prices up over the past few days, should keep losses within limits,” Fritsch added. This week, the oil price has risen due to investor concerns that the escalating conflict in Syria might spread to other oil-producing countries in the Middle East.
**Natural Gas Price Snapping Gains**
Natural gas futures for July delivery shed 0.7 percent to $3.935 per million British thermal units on the NYMEX before trading at $3.939 as of 14:08 SGT. The natural gas price hit a two-week high of $3.963 per million British thermal units yesterday, boosted by forecasts of higher-than-average temperatures which are seen as increasing gas demand for powering air conditioners.
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