Oil Falls to Six Month Low

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.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza