Oil prices slump to 4-month low on U.S., Chinese economic concerns By Reuters
© Reuters. FILE PHOTO: Word “Oil” and stock graph are seen through magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Stephanie Kelly
NEW YORK (Reuters) -Oil prices dropped around 5% on Thursday to their lowest in four months, as investors worried about global oil demand following weak data from the U.S. and Asia.
futures settled down $3.76, or 4.6%, to $77.42 a barrel. U.S. West Texas Intermediate crude (WTI) shed $3.76, or 4.9%, to $72.90. Both Brent and WTI earlier traded at their lowest since July 7, at $76.60 and $72.16, respectively.
Both WTI and Brent’s front-month contracts also traded below later-dated contracts, a structure known as contango.
“The mood is negative, the charts are negative,” said Phil Flynn, an analyst at Price Futures Group. “It’s going to take something to change that mood, and until then people will ride it down until they realize it’s overdone.”
The number of Americans filing new claims for unemployment benefits increased to a three-month high last week, suggesting that labor market conditions continued to ease.
The report came after other data that showed U.S. retail sales fell for the first time in seven months in October as motor vehicle purchases and spending on hobbies dropped. This pointed to slowing demand at the start of the fourth quarter that further strengthened expectations the Federal Reserve is done hiking interest rates.
OPEC and the International Energy Agency (IEA) have both predicted supply tightness in the fourth quarter, but U.S. data on Wednesday showed inventories were abundant.
Meanwhile, an expected slowdown in Chinese oil refinery throughput also gave investors pause. Runs eased in October from the previous month’s highs as industrial fuel demand weakened and refining margins narrowed.
Still, Chinese economic activity rallied in October as industrial output increased at a faster pace and retail sales growth beat expectations.
“The current price drop is taking place amid a seemingly auspicious backdrop, which suggests that investors simply do not buy into the ‘Q4 stock draw’ narrative; something that is not backed up by the recent weekly EIA reports either,” said Tamas Varga of oil broker PVM.
As the Israel-Hamas conflict appeared to be escalating in Gaza, U.S. officials on Wednesday said they would enforce oil sanctions against Iran, which has long been a backer of Hamas.