Oil prices slide on China stocks rout, supply glut

This underlines the persistence of the glut in supply, already lowering oil prices with the anticipated swift return of Iranian output to the market.

Brent crude oil prices declined to $53.51 per barrel, a drop of 1.09 percent.

Other commodities, including copper and lumber, that were being gobbled up in recent years when China was building out a massive infrastructure have also been subject to massive selling and sizable losses as the China growth story changes from a sure thing to fears of a hard landing.

Analysts believe that the prospect of lower oil prices could force the world’s top producers to cut spending as they face the prospect of yet another hit to quarterly profits.

According to Adam Longson at Morgan Stanley, crude demand, which had supported prices earlier in the year, is near a seasonal peak and will decline into the fall.

“The surprising strength in demand, together with opportunistic stock-building, absorbed more of the global crude oil surplus than we had expected in the first half of the year”, Bank of America Merrill Lynch told the Wall Street Journal.

Gasoline futures fell 1.3% to $1.8041 a gallon.

Oil prices kicked off the week in the red, pressured by a rout in Chinese stock markets and continuing worries about the world-wide oversupply of crude. Brent for September settlement was 18 cents higher at $54.80 a barrel on the London-based ICE Futures Europe exchange.

Besides, oil for far-month September delivery moved down by Rs 15 or 0.48 per cent to Rs 3,134 per barrel in 108 lots.

A weaker dollar makes dollar-denominated commodities, including oil, cheaper for consumers using other currencies.

Oil markets are on high alert for any signs of negative impact on the real economy of China, Michael Wittner, analyst at Société Générale, said.

Investors are looking to the US Federal Reserve for direction this week. The Fed on Tuesday starts a two-day policy meeting, amid rife speculation of a September rate hike that could boost the dollar.