Crude falls 5pc as economic worries remain

London—Oil prices fell 5 percent to two-month lows after the US government reported a weekly crude draw within analysts’ forecasts, disappointing market bulls who had expected larger declines. A glut of refined products and economic growth concerns also continued to loom over the market. Brent crude futures were down $2.36, or 4.8 percent, at $46.44 per barrel by 1710 GMT. The session low was $46.27, the lowest for Brent since May 11.
US crude futures were down $2.23, or 4.7 percent, to $47.20. It earlier hit a two-month low at $44.87. The Energy Information Administration (EIA) said crude stockpiles fell 2.2 million barrels for the week ended July 1, drawing for a seventh week in a row. But the EIA’s figure came in just below the decline of 2.3 million barrels forecast by analysts in a Reuters poll but far less than the 6.7 million-barrel draw reported by trade group the American Petroleum Institute. “Expectations were high for this report, and they were dashed,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Traders said that a reported drop in US crude oil stockpiles was the main price driver, while a slight weakening in the US dollar, which makes oil more affordable for holders of other currencies, also helped. The American Petroleum Institute (API) said its data showed US crude stockpiles fell by 6.7 million barrels last week, declining for a seventh week in a row. The data also was bullish for oil products, showing draws in both diesel and gasoline. “Oil demand growth remains robust,” UBS said in a note, adding that “an historically high level of physical inventories … is no bar to a rising price if the direction of travel in market adjustment is supportive.”
However, traders warned that an economic slowdown and a glut in supplies of refined products were weighing on oil markets. Asian crude demand is slowing and by some measures falling, which market participants said could be due to an economic slowdown and perhaps even more permanent structural changes. “Growth is slipping again … and things don’t seem quite so rosy,” HSBC said in a note to clients. While both stocks and sterling climbed on Thursday, oil industry observers warned that fall-out from Britain’s vote to leave the European Union last month could weigh on oil prices if the market turmoil spread.—Reuters

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