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Crude extends losses, US oil trades below USD 40

Oil prices

Singapore:  Crude prices dived in Asia today, with US oil hovering below the key USD 40 a barrel mark amid deepening concerns about weak Chinese economic growth and global oversupply, analysts said.

US benchmark West Texas Intermediate (WTI) for October delivery fell USD 1.04 to USD 39.41 while Brent crude for October eased 91 cents to USD 44.55 in late-morning trade.

WTI extended losses after briefly dipping to USD 39.86 on Friday in New York — breaking USD 40 for the first time in six years — after data showed an increase in US oil rigs despite ample global supplies.

“Soft manufacturing data from China and continued increase in weekly rig count led to the sharp sell-off” in oil prices, said Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at consultancy EY.

The Baker Hughes US oil rig count showed producers in the world’s top crude consumer added two more rigs in the week to August 21, the same number as the previous week, bringing the overall tally of active drilling oil rigs to 674.

A much weaker-than-expected manufacturing report on Friday also added to concerns energy demand is also waning in China.

The Caixin’s Purchasing Managers’ Index came in at 47.1 this month, falling from 47.8 in July and its worst reading since March 2009. A reading below 50 signifies contraction in activity.

The poor data fuelled concerns about the world’s second- largest economy and top energy importer — already heightened by Beijing’s unexpected devaluation of the yuan two weeks ago — at a time when high production levels and weak demand growth are weighing on prices.

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