Oil Drops to $32 on Fears About China’s Economy

World oil prices fell to their lowest levels in 12 years Thursday as China s market turmoil heightened worries about the state of the world s second-largest consumer of crude oil.

Meanwhile, West Texas Intermediate crude prices for February delivery was up 45 cents or 1.35 per cent at $33.72, while Brent crude for February delivery rose 41 cents or 1.21 per cent to $34.16 a barrel on the New York Mercantile Exchange. Crude oil prices could see a support level of $32 per barrel.

On Jan 7, the average price paid by India for importing crude oil was $29.24, substantially lower than the $33 level seen in global oil exchanges such as NYMEX.

Chinese stocks were boosted as the yuan currency firmed in early trade after the People’s Bank of China strengthened its official rate for the first time in nine trading days.

The central bank, which highlighted concerns about weaker growth in China, noted that CPI inflation was below its 1 to 3 per cent target range, in part due to sharp falls in world oil prices since mid-2014. “2016 is going to be very tough for them as the oil market is unlikely to balance out this year”.

Data obtained from Energy Administration indicates that oil capped the biggest two-year loss on record in 2015 as the Organization of Petroleum Exporting Countries (OPEC) effectively abandoned output limits amid a global glut. Royal Dutch Shell Plc, Europe’s biggest oil company, dropped as much as 5.7 percent and BG Group Plc, the company it’s seeking to buy, fell as much as 6.4 percent in London. Financial markets fear the yuan’s rapid depreciation may accelerate, which would mean China’s economy is even weaker than had been imagined. The contract slid 2.1 percent to $33.27 on Thursday, the lowest close since February 2004. “It could go even lower, and it just underlines the uncertainty”.

The discussions focused, among other things, on subjects such as increasing the share of gas in India’s energy mix, fresh investment in oil and gas exploration in India, regulatory frameworks and global acquisition of oil and gas assets, said the Prime Minister’s Office.

The global economy will sputter along this year as China’s slowdown prolongs a commodity slump, the World Bank said Wednesday.

Oil prices were under pressure this week amid rising tension between Saudi Arabia and Iran.

On Wednesday, U.S. government data showed a 10.6-million-barrel surge in gasoline supplies, the biggest weekly build since 1993.

The rapid fall has made a prediction that Goldman Sachs made previous year that crude could fall as low as $20 per barrel seem less outlandish than it then seemed.