WTI Extends Losses Amid China Economic Slowdown

WTI crude kept its declining pace for a fifth day, which is the longest run of declines this year, following concerning data about Chinas economy published last week. The Asian nations Advance Purchasing Managers Index hit a seven-month low value of 49,6 in May, compared to a final reading of 50,4 in April. This had a great impact on oil prices as China is its world second biggest consumer and accounts for 11% of the global consumption.

On the New York Mercantile Exchange, WTI crude dropped 0,45% on Friday and settled at $93.84 for the week. Overall for the preceding week, Nymex oil futures slipped 2,55%, the biggest weekly decline since the week ending April 19.

President Xi Jinping said on May 24 that China wont sacrifice the environment in order to ensure short-term growth. Jonathan Barratt, CEO of Barratts Bulletin, a commodity newsletter in Sydney, said: ” While the international market is slowing down, I don’t think you’ll see China being aggressive about expanding.”

Brent crude follows the same trend and extended on Monday its losses from last week, when it lost 2%. Brent dropped from its monthly high of near $106 after news of Chinas factory activity slowing down came out. Further pressure on oil prices was applied from last weeks Fed minutes where it came to notice that some policy makers think the stimulus measures should be scaled down in June, which would increase the dollars value. Strengthening of the dollar tends to decrease the prices of the dollar-priced commodities as it makes the greenback more attractive for investors. Also a more expensive dollar makes commodity prices costlier for foreign currency holders.

Oil prices found very little support by the positive economic data out of the U.S. on Friday. However it couldnt boost upward the declining oil price. According to the U.S. Commerce Department Durable Goods Orders rose by a seasonally adjusted 3.3% in April, way above the forecast of 1.5%, up from a revised -5.9% value for the preceding month. Durable Goods Orders excluding transport rose 1.3%, up from -1,7% for the preceding period and higher than the prediction of 0,5%.