(News Bulletin 247) – Oil prices fell on Wednesday, weighed down by concerns about the global economy. Both Brent and WTI are trading below $80, the lowest since July.

Oil prices widened their losses on Wednesday, pulled down by a gloomy economic outlook in China and Europe, raising fears for global demand.

A barrel of Brent from the North Sea, for delivery in January, plunged 2% to $79.94, its lowest since July. Its American equivalent, a barrel of West Texas Intermediate (WTI) for delivery in December, dropped 2.2% to $75.61, also its lowest since July.

“This sharp decline was mainly driven by concerns over the outlook for global demand due to weak data from China and other economies,” commented SPI AM analyst Stephen Innes.

China worried

The fall in Chinese exports accelerated in October, with a decline of 6.4% over one year, according to figures published by the country’s customs on Tuesday, a figure which does not encourage optimism for the growth of the country.

However, exports are historically a key growth lever for the second largest economic power in the world. And the growth of the world’s leading crude oil importer is being scrutinized by oil investors.

At the same time, “concerns about a deterioration in demand in Western economies have been aggravated by German data,” continues Stephen Innes.

Gloomy outlook

Industrial production in Germany actually fell more than expected in September, weighed down by automobiles, illustrating the difficulties of Europe’s slowing economy. Over one year, industrial production fell by 3.7%.

The gloomy economic outlook “seems to have eliminated the risk premium from the conflict in the Middle East”, note analysts at Energi Danmark, who predict that prices could continue to fall “unless tensions (…) intensify” in the war between Israel and Hamas.

“Concerns about global demand (…) have outweighed the impact of supply reductions,” also underlines John Plassard, analyst at Mirabaud, recalling that on Sunday, Saudi Arabia and Russia had reaffirmed their commitment to further voluntary oil supply reductions until the end of the year.

(With AFP)