SINGAPORE: Oil prices were volatile in Asian trade on Tuesday as equities tumbled over concerns the slowing Chinese economy could weigh on global economic growth.
US benchmark West Texas Intermediate for November was unchanged at $44.43 and Brent crude for November added two cents to $47.36 in afternoon trade, with prices see-sawing between positive and negative territory throughout the day.
“We think the prices of key commodities, such as oil and copper, are close to finding a floor, but sluggish demand growth and battles among producers for market share will keep prices under pressure for some time to come,” Barclays bank said in a market commentary.
Analysts said the bearishness in equities was spilling over into the oil market, with resources firms leading a sell off in Asian stock markets Tuesday.
Demand has been hit hard by a slowdown in China, the world’s top energy consuming nation, while other Asian countries have also seen their economic growth shaved.
On Monday, profits at China’s major industrial companies fell almost nine percent in August from a year ago, the biggest decline since 2011, in the latest sign of weakness in the world’s second biggest economy.
Last week, data showed that Chinese factory activity shrank at its fastest pace in six and a half years in September.
“We think Asia faces a protracted ‘growth’ crisis, not a financial crisis,” US banking giant Citigroup said.
As demand falters, the oil market is being rattled by the prospects of Iran exporting more crude if it is found to have complied with the terms of a deal signed in July to curb the country’s nuclear program.
International inspection of Iran’s nuclear facilities is underway and compliance would lead to a lifting of crippling economic sanctions which have restricted its crude exports.
Analysts say Iran can ramp up exports within months after the sanctions are lifted, adding more oil to the oversupplied market.