Update Oil prices fall after China devalues yuan

by **Cals** Tue 11 Aug 2015, 17:47

Update
Oil prices fall after China devalues yuan

SINGAPORE (Aug 11): Oil prices slumped on Tuesday following a jump in the previous session, as China devalued its yuan currency after a run of poor economic data that underscored the market view that fundamentals are too weak to warrant higher oil prices.
Crude oil futures jumped almost 4 percent on Monday, moving away from January lows, as speculative traders increased their net-long positions, but prices slumped again on Tuesday and remain over a quarter below their most recent peaks in May.
China devalued the yuan on Tuesday in what its central bank called a "one-off depreciation" of nearly 2 percent as its economy grows at its slowest pace in decades, guiding the currency to its lowest point in almost three years.
"For the yuan devaluation, this makes it more expensive for China to import USD-denoted oil. This would affect the demand for oil as China is one of the major importers," said Daniel Ang of Singapore-based brokerage Phillip Futures, although he added that its price impact would only be marginal as currency issues typically only weighed on oil prices in the short-run.
Also on Tuesday, industry data showed auto sales in China fell 7.1 percent in July from a year earlier to 1.5 million vehicles, their biggest decline since February 2013. But overall 7-month growth this year still stood slightly above 2014 figures.
As a result, front-month Brent futures were at $50.10 a barrel at 0632 GMT, down 31 cents from their last close. U.S. crude fell 39 cents to $44.57.
"Global crude benchmarks remain under pressure, with Asian run cuts weighing on Atlantic Basin, Asian and Middle Eastern light grades," Energy Aspects said.
The overall low prices come on the back of weak supply and demand fundamentals, with output from key producers like the Organization of the Petroleum Exporting Countries (OPEC), Russia and the United States near record highs just as demand growth slows.
In China, the world's No.2 economy and oil consumer, exports tumbled 8.3 percent in July in their biggest fall in four months, threatening the government's 7 percent economic growth target for this year, already the lowest in decades.
"Talk of run cuts in Asia driven by weak distillates markets does not bode well for crude prices," Energy Aspects said.