Crude oil hits session low after Saudi Arabia comments

Crude oil futures remained under pressure during U.S. morning hours on Monday, falling to the lowest levels of the session after Saudi Arabia’s oil minister said he was concerned about rising oil prices. Fears over a deeper-than-expected slowdown in China’s economy also weighed, as investors looked forward to the conclusion of the Federal Reserve’s closely-watched policy-setting meeting later in the week. On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD95.86 a barrel during U.S. morning trade, slumping 0.6%. Earlier in the day, prices fell by as much 1% to hit a session low of USD95.41 a barrel. Saudi Arabia’s Oil Minister Ali al-Naimi said earlier that global supply, demand and inventories of crude do not justify the current increase in oil prices. “The price of oil is simply not supported by market fundamentals. The market is well balanced, forward cover remains within an acceptable range and inventories are more than adequate,” al-Naimi said. Despite the gloomy global economic outlook, oil markets have been bullish lately, with New York-traded crude prices up approximately 20% since touching a low of USD77.27 a barrel on June 28, while London-traded Brent prices have rallied nearly 22% from the lows touched in June. Prices have been well-supported amid growing expectations that central banks around the world will soon announce fresh stimulus measures to help spur weak global growth. Renewed fears over escalating violence in Syria and lingering tensions between Iran and the West have also been supporting prices in recent weeks. Oil futures were lower during the Asian trading session after official trade data showed that Chinese imports fell 2.6% from a year earlier, confounding expectations for a 3.5% increase, while exports grew just 2.7% on the year in August, below expectations for a 2.9% gain. The report also showed the nation’s crude oil imports in August fell 12.5% from a year earlier to the lowest daily rate since October 2010, underscoring fears over a slowdown in domestic oil demand. The weak trade data came after reports over the weekend showed that consumer prices rose 2% from the year-ago period, in line with expectations and up from 1.8% in July, while monthly industrial output rose 8.9%, the slowest pace of increase in 39 months. A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of the euro zone’s ongoing debt crisis. China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand. However, sentiment remained supported after Friday’s disappointing U.S. employment data sparked fresh expectations for another round of quantitative easing by the Federal Reserve. The Department of Labor said the U.S. economy added 96,000 jobs in August, well below expectations for 125,000, following a downwardly revised 141,000 in July. The unemployment rate ticked down to 8.1% from 8.3%, as more jobless workers exited the labor force. Oil traders are now looking ahead to the Fed’s next policy meeting, which will take place on September 12 and 13, for more clarity on the central bank’s monetary policy. Market players were also eyeing Wednesday’s German court ruling on the constitutionality of the European Stability Mechanism, as Germany’s approval will be necessary in order to implement the new bond-buying plan announced by the European Central Bank last week. Under the terms of the plan, the ECB would buy unlimited amounts of government bonds of up to three years in maturity, as long as the country in question agrees to economic reforms in return for assistance. Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery fell 0.1% to trade at USD113.70 a barrel, with the spread between the Brent and crude contracts standing at USD17.84 a barrel.

Courtesy: ForexPros