05 November 2014 – Brent crude dropped further below $83 a barrel on Wednesday, stretching losses into a fifth session, as weak economic data from top energy consumer China stoked worries about demand in a market that is already battling a deepening global supply glut.
Services sector growth in China weakened in October as new business cooled, a private survey showed, coming just days after previous data revealed sluggish factory growth in the world’s second largest economy.
“We had expected this,” said Avtar Sandu, senior manager for commodities at Phillip Futures of the Chinese data. “The market is already soft for Brent and the Chinese data is not going to help although the numbers are not a surprise.”
Brent fell 28 cents to $82.54 a barrel early on Wednesday.
US crude slipped 5 cents to $77.14, coming off a low of $75.84 hit in the previous session – its weakest since October 2011 – after data showed crude stocks unexpectedly fell last week as refineries boosted output.
US crude stocks fell 639,000 barrels to 374.9 million in the week to 31 October, compared with analysts’ expectations for a increase of 2.2 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.
The market is now waiting for weekly inventory data from the US Department of Energy’s Energy Information Administration (EIA) later in the day for more clues on demand in the world’s top oil consumer.
Oil prices on both sides of the Atlantic lost more than 2% overnight after Saudi Arabia cut export prices to the US threatening to deepen a global supply glut that has driven prices down 30% since June.
A bleak outlook for Europe after the European Commission downgraded its forecast for euro zone economic growth over the next few years also weighed on oil prices.
“The downgraded forecast in Europe is not really a surprise but it is a reminder that there is a risk,” said Ric Spooner, chief analyst at CMC Markets in Sydney on how the weak economic outlook could crimp demand.
“I think we are in a situation where the oil price needs to fall to a level where it actually results in supply changes. But what that level is, is what everybody is asking.”
Saudi Oil Minister Ali al-Naimi is making his first visits in years to fellow exporters Venezuela and Mexico, although tumbling oil prices are not the stated purpose of the trip, according to officials and sources.
Still, the travel plans come at a pivotal moment for Saudi Arabia and the Organization of the Petroleum Exporting Countries, which meets later in November to discuss how to respond to the rout in global oil prices.