Oil prices fell more than four per cent to fresh six-and-half-year lows yesterday after Chinese stock markets suffered their biggest one-day drop since the global financial crisis, intensifying worries over the outlook for global oil demand.
Inaction by the Chinese government following an 11 per cent rout in local stock markets last week encouraged a free-fall in global equities and other commodities yesterday. As a consequence, losses on the pan-European FTSEurofirst 300 index for this month added up to as much as €1 trillion.
“Today’s falls are not about oil market fundamentals. It’s all about China,” Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told Reuters Global Oil Forum.
“The fear is of a hard landing and that things get out of the control of the Chinese authorities.”
Brent oil was trading down $1.85, more than four per cent, at $43.61 a barrel at 0950 GMT, after touching an intra-day low of $43.28, its weakest since March 2009.
The fear is ... that things get out of the control of the Chinese authorities
US light crude was down $1.50, or 3.7 per cent, at $38.95 a barrel, after falling as low as $38.69. Steep losses last week capped the contract’s longest weekly losing streak since 1986.
US crude is now more than 17 per cent below its opening price at the start of the month and Brent is down more than 10 per cent. Multi-year lows in oil prices have so far failed to trigger any action from the world’s biggest producers to rein in output.
However, Iran’s Oil Minister Bijan Zanganeh said on Sunday that holding an emergency Opec meeting could be “effective” in stabilising oil prices, Iran’s oil ministry news agency Shana reported.
There was a similar call by Algeria earlier this month, but other Opec delegates said no meeting was planned. Zanganeh also said Iran would defend its oil market share by ramping up production at any cost and as soon as possible.
“We will be raising our oil production at any cost and we have no other alternative,” Zanganeh said.
“If Iran’s oil production hike is not done promptly, we will be losing our market share permanently.”
In a sign that relations between Iran and Western powers are improving, Britain reopened its Tehran embassy on Sunday.
Several oil and gas companies, including representatives from Shell, travelled to Iran with Foreign Minister Philip Hammond.