Weak Economic Reports China and Europe Lower Current Crude Oil Prices

Oil prices dropped closer to $103 a barrel after China and Europe’s weak report of their economy.

Oil, a traded commodity worldwide, usually moves according to the expectations of investors for economic development as well as its supply and demand worldwide. Recently, traders saw indications of problems from both continents.

According to China, the second biggest consumer of oil after the United States, GDP grew by only 8.1% (annualized) between the months of January and March. Although that is considered a phenomenal growth rate to the rest of the world, that is China’s weakest period in three years. A weak economy for China has many effects for crude oil prices because its growing factories and cities have been the main drivers of oil demand globally.

Investors continue to worry on the huge national debt of Europe. Yields grew on government bonds provided by Spain and Italy. The implication of which is that those nations will face higher borrowing costs from investors.

U.S. Benchmark crude prices dropped by 61 cents to end at $103.03 a barrel in the recent NYMEX trading. In London, Brent crude prices fell by 55 cents to finish at $120.97 a barrel.

According to the AAA, Oil Price Information Service and Wright Express, retail gasoline prices in the United States dropped for the seventh consecutive day to a countrywide average of $3.90 a gallon. A reduction of 3.5 cents was observed in the recent prices of regular gasoline.

Elsewhere in the commodities market, prices of natural gas remained close to its lowest level in a decade as it remained unchanged at $1.981 for every 1,000 cubic feet. A one cent increase was posted by heating oil prices to reach a per gallon price of $3.1682. Gasoline futures declined by a penny to finish at $3.3418 a gallon.

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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