Oil falls toward $93 as China tightens lending
- Article by: PABLO GORONDI
- Associated Press
- June 24, 2013 - 7:55 AM
The price of oil fell slightly Monday amid growing worries that China's decision to clamp down on informal lending could hamper growth in a major energy-consuming country.
By early afternoon in Europe, benchmark oil for August delivery was down 13 cents to $93.56 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.71 to close at $93.69 on Friday.
Analysts say the spike late last week in China's interbank lending rate to over 13 percent was part of an effort to trim off-balance-sheet lending that could threaten the financial stability of the world's second-largest economy.
But markets feared the move could also hurt economic growth. China's major state-owned banks are unwilling to lend to any but their biggest clients, so the vast majority of smaller businesses must rely on informal lending.
Signs of an economic slowdown are already visible in the world's No. 2 economy. Last week, a private survey showed manufacturing in China contracted at a faster pace in June to a nine-month low. Moreover, Chinese economic growth slowed unexpectedly in the first quarter to 7.7 percent and forecasters have cut their growth outlook for the year. Asian and European stock markets fell, and oil prices moved along with them.
"Weaker growth and funding concerns in China added another layer of uncertainty to the market psyche," analysts at Credit Agricole CIB in Hong Kong said in a commentary.
A stronger dollar also hurt oil prices, making crude more expensive for traders using other currencies. The euro was below $1.31 on Monday after peaking above $1.34 last week.
Analysts said concerns about Middle East conflicts like the civil war in Syria, which pushed crude up to near $99 last week, were temporarily less in focus.
"The supply risks which contributed significantly to the rising prices up to the middle of last week have now moved into the background," said a report from Commerzbank in Frankfurt. "That does not mean they have gone away, however; indeed they are likely to prompt a price recovery just as soon as the headwind from the financial markets abates."
Brent crude, which is used to price oil used by many U.S. refineries to make gasoline, was down 44 cents to $100.47.
In other energy futures trading on the Nymex:
— Wholesale gasoline lost 0.65 cent to $2.7402 a gallon.
— Heating oil rose 0.52 cent to $2.8486 per gallon.
— Natural gas added 1.8 cents to $3.789 per 1,000 cubic feet.
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