WSJ:Oil Pressured by Emerging-Market Demand Concerns
By Cassie Werber
Crude-oil futures were trading lower in London Wednesday, with jitters over emerging-market demand applying downward pressure on the price.
Anticipation ahead of the Federal Reserve Open Market Committee's meeting minutes, due after the close of European markets, also continues to weigh on prices amid uncertainty over the future of the "tapering" stimulus that has buoyed the U.S. economy over the past five years.
Brent crude for October delivery was down 66 cents at $109.49 a barrel on ICE Futures Europe. U.S. crude-oil futures fell 41 cents to $104.70 a barrel on the New York Mercantile Exchange, on the first day of the October contract.
"General sentiment is afraid of developments in the developing markets" said Torbjorn Kjus of DNB Markets. "China has been behind more than 40% of the oil growth demand for the last ten years, [but] one of the key developments is the risk that we may see much lower oil demand growth in [all] the BRIC countries."
Concerns over demand growth from emerging markets was also cited as a price-depressing factor by David Hufton of brokerage PVM. In a note to clients, he pointed to signs of currency or economic weakness from India, South Africa, Brazil, Thailand, Turkey and Mexico.
"All of this year and next's oil demand growth is forecast to come from emerging market countries. If growth in these countries stalls so will oil demand growth," he said.
However, he said there is considerable support for the price as well, principally from disruption in oil-producing Libya. Clashes erupted Tuesday at oil terminals that had been closed in Eastern Libya, oil officials said, in the latest evidence of mounting tensions in the oil exporting nation.
Social unrest in Egypt also continues to affect the oil market, likely keeping prices higher. Egypt controls the Suez Canal, a route vital for oil movements from the Middle East.
"What happens in Egypt has repercussions throughout the region," said Simon Wardell of IHS Global Insight.
Recently, the ICE's gasoil contract for September delivery was down $3.75 at $935.00 a metric ton, and Nymex gasoline for September delivery was down 69 points at $2.9203 a gallon.
