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China gloom leaves Oil shaken and stirred

By Religare

Oil reeled under severe China turmoil that has pushed global stock, currency and commodity markets into a spin with the fuel accelerating a sell-off in the domestic market on Monday, and plunging to its lowest level in six and a half years in the overseas market.

Traders shunned risky bets in the energy commodity as a worsening rout in China's stock markets signaled deep rooted problems in the world's second biggest economy, threatening to curb demand for the fuel.


China's Shanghai Composite which had tumbled 11 per cent last week, registered its worst drop since 2007 on Monday, tanking 8.5 per cent as policymakers refrained from fresh measures to support the markets.

The China mayhem spread to markets across Asia, Europe and the US with Wall Street posting its biggest drop in four years as the Dow Industrial Average crashed 1,000 points when trade opened, before paring losses.

Investors are concerned that a rout in Chinese equities may spread to other parts of the country's economy, curbing fuel demand in the world's second biggest oil consumer.

Amidst worries over a gloomy demand outlook in China, signs that a supply glut may worsen has also plagued sentiment in the fuel with a fifth weekly gain in US oil rig count signaling the prospect of higher production going forward even as stockpiles remain at an 80-year high, while the OPEC seems powerless to stop an oil price slide as big members such as Saudi Arabia pump oil at record levels in a bid to maintain market share amidst stiff competition from US shale producers.

Oil may extend losses today as a continued China stock market rout plagues sentiment.

At the MCX, Crude oil futures, for the September 2015 contract, closed at Rs 2,639 per barrel, down by 1.68 per cent, after opening at Rs 2,672, against the previous close price of Rs 2,684. It touched an intraday low of Rs 2,577.

Story first published: Tuesday, August 25, 2015, 12:20 [IST]
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