Brent Crude Oil Prices Fall to Lowest Current Level since October 2011

According to AFP, Brent crude oil prices dropped below $100 a barrel, a level not seen since since October due to the weak data of China and the US, as well as the eurozone’s Spain-centered debt struggles.

Brent North Sea for delivery in July fell by $2.27 to reach a crude oil price per barrel of $99.60. October 4, 2011 was the last time prices were at such a low point.

The main contract of New York, West Texas Intermediate (WTI) crude prices for delivery in July dropped to $84.8 a barrel, not seen since October 20 of last year.

According to SEB commodities analyst Mr. Filip Petersson, Brent crude is pushed lower by the current pessimism throughout the markets. He said that several factors contribute to the situation, including the situation of Europe and recent economic data from the United States.

But, Petersson said that supplies are at the peak level in many years, and that usually causes a fall of the crude price. Currently, it is the PMI of China that weighs down sentiment in the market. The slowdown of China goes on, and no indications of concrete stimulus have been shown by authorities.

According to China, its production activity increased at a slower than expected rate in the month of May. That further confirmed that the number 2 economy of the world is quickly slowing down, following the latest figures on investment, industrial output and trade. The official PMI dropped from April’s 53.3 to 50.4.

A reading over 50 shows expansion, while below 50 signals contraction. According to HSBC, its May PMI is 48.4, versus 49.3 last April.

In the U.S., the government reduced its projection from 2.2% to 1.9% for the economic growth in the first quarter. That raised concerns regarding the amount of rebound that can be anticipated in the present quarter.

Two recent jobs reports – unemployment claims per week and the job creation in the private-sector for the month of May – were both disappointing. That indicated slow economic improvement. Eyes are currently on the important non-payroll employment data from Washington to serve as a key indicator of the economic recovery of the U.S.

In Europe, the economic and political future of Greece stays uncertain, the banking sector of Spain looks more fragile and debt-burdened Madrid may require an international bailout.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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