Oil Prices Rose Despite Low Q2 Economic Growth in China

The latest oil price per barrel rose to almost $87 per barrel despite of China’s slow economic growth for quarter two this year. That growth of the second biggest consumer of crude worldwide is the lowest in a period of three years, but it was consistent with forecasts.

In early afternoon trading at the NYMEX, Benchmark oil for delivery in August rose by 83 cents to $86.91 a barrel. It finished the trading day at an oil price per barrel of $86.08.

Brent crude for delivery in August also rose by 90 cents for a price of $101.97 per barrel in London’s ICE Futures exchange.

According to China, its GDP increased by 7.6 percent within April to June compared to the earlier year. But that is the country’s lowest growth since 2009. Moreover, the country reported slow growth in factory output and retail sales in the month of June.

The current oil price reflects a peak decline from its high level of $106 per barrel in the month of May in the midst of indications that economic growth in Europe, China and the United States is slowing down. Several analysts anticipate world policymakers to keep on easing fiscal policy and strengthen monetary spending to encourage growth of the economy and increase oil demand.

New sanctions imposed by the U.S. against Iran for the purpose of restraining its alleged nuclear program also aided in supporting current oil prices. The recently announced sanctions were aimed at individuals and companies affiliated with the defense ministry of Iran. Past sanctions were meant to limit exports of Iranian oil.

In the early parts of this year, refineries in Europe stopped purchasing oil from Iran and the banks of the Arab nation were hampered from dealing with most other banks worldwide.

Iranian leaders have threatened to obstruct the Hormuz Strait in retaliation to the sanctions. Consequently, that will slow down or stop shipments of almost 20% of the world’s oil supply.

By: Chris Termeer