Forexpros – Crude oil futures were down sharply during European morning hours on Tuesday, as growing fears over a deeper-than-expected slowdown in China and news that a complete shutdown of Norway’s oil industry was averted weighed on prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD84.88 a barrel during European morning trade, tumbling 1.3%.
It earlier fell by as much as 1.6% to trade at a session low of USD84.63 a barrel.
Fears over the global economic outlook intensified after official data showed that Chinese exports and imports in June slowed from the previous month, as weakening global demand weighed.
In a report, the Customs General Administration of China said the nation’s trade surplus widened to a three-year high of USD31.7 billion in June from USD18.7 billion in the previous month.
The report said that exports rose by 11.3% in June from a year earlier, slowing from 15.3% in May. Imports grew by 6.3%, significantly below expectations of 11.0% and slowing sharply from 12.7% in the previous month.
Normally a widening trade surplus is considered a good thing, but June’s result appeared more related to a weakness in imports, fuelling concerns over a slowdown in the world’s second largest economy.
Investors were looking ahead to Chinese economic data due out later this week, including second quarter growth figures, to gauge whether China is a heading towards a hard or a soft landing.
A deeper slowdown in China would impair a global expansion that is already faltering because of the ongoing debt crisis in the euro zone.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Oil prices came under further pressure after Norway’s government intervened in an ongoing labor strike between petroleum workers and oil companies, and ordered compulsory arbitration in the dispute early Tuesday.
Reuters quoted Norwegian Labor Minister Hanne Bjurstroem as saying, “I had to make this decision to protect Norway’s vital interests. It wasn’t an easy choice, but I had to do it.”
Under Norwegian law, the government can force the striking workers back to work to protect the industry on which much of the country’s economy depends.
Norwegian oil giant Statoil said after the announcement that it expected to resume production at its installations affected by the strike within a week.
Prices jumped nearly 2% in the previous session on news that Norway’s oil companies were preparing to completely shut down production if the government did not intervene by midnight Tuesday.
Norway is the world’s eighth largest oil producer and the fifth largest exporter.
Meanwhile, investors continued to monitor developments out of the euro zone after a meeting of finance ministers from the region on Monday offered few signs of progress in tackling the region’s debt crisis.
Euro zone ministers agreed to push Spain’s deadline to reach its deficit reduction targets back to 2014 in exchange for further budget savings and set the parameters of an aid package for Madrid’s ailing banks.
The ministers made no apparent progress, however, on activating the bloc’s rescue funds to intervene in bond markets and bring down Spain and Italy’s spiraling borrowing costs.
Spain’s 10-year government bonds were hovering at 7.03% earlier Tuesday, above the 7% threshold which is widely seen as unsustainable.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery fell 1.55% to trade at 98.78 a barrel, with the spread between the Brent and crude contracts standing at USD13.90.
London-traded Brent prices rallied to a three-week high of USD102.33 a barrel on July 5.
Brent prices have been well-supported in recent sessions amid concerns over a disruption to supplies from Norway and a launch of Western-led sanctions targeting Iranian oil exports.
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