Oil prices fall to lowest in nearly six months
Singapore (July 28) Oil prices fell to their lowest in nearly six months on Tuesday, as a rout in the Chinese stock market cast further doubt over the outlook for crude demand in the world's top commodities consumer.
China's already-volatile benchmark stock index, with a combined market capitalization of $4.6 trillion, has lost 10 percent in the last two days of trade.
Most household debt is linked to real estate rather than the stock market, but with Chinese economic growth struggling to stick at 7 percent, analysts say demand for crude may not be enough to help mop up a global supply glut.
"Typically, equity markets do have a high correlation to quarterly GDP growth," Deutsche Bank strategist Michael Lewis said.
"Naturally, there is some risk that this could spill into the real economy. The more these things go down on a day-by-day basis, that is starting to affect the potential of Chinese demand growth being weaker."
Brent was down 72 cents at $52.75 a barrel by 1054 GMT, having hit a session low of $52.28, its lowest since early February, bringing the losses for July to nearly 18 percent.
Brent crude is on track for its longest stretch of daily losses since March, when the price hovered just dollars away from six-year lows.
U.S. crude was last down 33 cents at $47.06 a barrel after ending the previous session down 75 cents.
Adding to the uncertainty over the health of the Chinese economy is concern about rising global oil production in a market already oversupplied by some 2 million barrels a day.
Investors are watching for weekly data on U.S. inventory levels to gauge the strength of demand.
U.S. commercial crude oil stocks likely slipped last week after crossing the five-year seasonal average build in the previous week, a preliminary Reuters poll of analysts showed ahead of industry and official weekly reports.
Crude stocks fell about 300,000 barrels to 463.6 million barrels in the week ended July 24, analysts estimated.
"We're not seeing the level of demand in the U.S. one usually expects related to the summer drive-time," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.
"The world is awash with oil."