This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Oil Prices Slump on China Growth Outlook

NEW YORK ( TheStreet) -- Oil prices were slumping Wednesday morning on concerns of slowing economic growth in China and significant strengthening of the dollar on eurozone fears.

Brent crude oil for August delivery was falling $1.05 to $112.56 a barrel, while West Texas Intermediate (WTI) light sweet crude oil for August delivery was lower by 37 cents at $96.52. The weakening prices followed an oil price rally in the previous session, where a bullish oil forecast pushed prices above a key technical level and prompted a bout of technical buying.

"This morning crude is having a more logical price move than it did yesterday, and is selling off as China raised interest rates overnight for a third time this year," Summit Energy analyst Matt Smith said in a client note. "This is spurring on risk aversion, as although these rate increases will have the likely desired effect of curbing inflation, they will also work to slow economic growth in China, and hence oil demand going forward." China's is the world's largest energy consumer.

"Add to this a flight from the euro after Portugal was downgraded by Moody's to junk status yesterday, and crude is being pressured lower today."

The most widely-traded currency, the U.S. dollar, was stronger by 0.6% at $75.04. A weaker dollar encourages investors to buy oil, which is largely a U.S. dollar-based commodity, while a stronger dollar is seen to have the opposite effect. The euro was falling 0.9% against its U.S. counterpart at $1.4302.

The August natural gas contract was slumping by 1.2% to $4.313 per million British thermal units, planted between the $4.20 to $4.40 range that it's been trading in for the last several weeks. According to Smith of Summit Energy, the forecast of above-normal temperatures across much of the eastern half of the U.S. and particularly hot weather in the Midwest through mid-July remains supportive of natural gas, as this should be accompanied by greater air-conditioning needs.

But in addressing concerns about possible disruptions to natural gas operations in the Gulf of Mexico during this hurricane season, Smith says, "there is nil/nada/nothing on the hurricane front, while tomorrow's storage number looks set to replicate last week's print."

Also weighing on the markets Wednesday morning was a report from The Institute for Supply Management that said activity within the services sector slipped in June. The ISM's non-manufacturing index fell to a reading of 53.3, from May's level of 54.6. The market had been looking for a stronger reading of 54 in June, according to

Oil and gas companies were trading mixed. Shares of independent petroleum company Tesoro (TSO - Get Report) were popping by 3% to $23.82 after being raised to overweight from equal weight at Barclays Capital and Exxon (XOM - Get Report) was down 0.9% to $80.91 after U.S. federal documents revealed that the oil major took twice as long than it initially claimed to completely seal a burst pipeline that spilled tens of thousands of gallons of oil into the Yellowstone River in Montana.

Devon Energy (DVN - Get Report) was slumping by 1.2% at $78.86 and SandRidge Energy (SD) was behind by 1.7% at $10.70.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.
Copyright 2011 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SD $0.00 0.00%
DVN $32.75 0.00%
TSO $78.65 0.00%
XOM $88.11 0.00%
AAPL $95.18 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs