(London) Oil prices fell slightly on Monday as investors expressed concern about China’s economic health, and therefore its demand, as one of the country’s largest real estate groups is struggling.
Around 6:30 a.m. (Eastern time) (12:30 p.m. in Paris), a barrel of Brent from the North Sea, for delivery in October, lost 0.38% to 86.48 dollars.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in September, yielded 0.44% to 82.82 dollars.
Crude is down “due to growing concerns over China and a worsening real estate crisis,” comment DNB analysts.
Shares in developer Country Garden, one of China’s largest real estate groups, slumped on the stock market on Monday, as the company’s precarious financial health and astronomical debt burden markets.
Its situation is the direct consequence of a crisis of unprecedented magnitude in real estate, a sector which, along with construction, has long represented a quarter of China’s GDP (Gross Domestic Product).
“The muted price response to last week’s encouraging demand estimates, OPEC supply cuts” (Organization of Petroleum Exporting Countries and Allies, editor’s note), shrinking and easing inflationary pressures is a wake-up call,” says Tamas Varga, PVM Energy.
As China is the world’s largest importer of rough, the health of its economy is indeed a major driver of demand.
“Investors seem increasingly convinced that inflation in the western part of the world is being brought under control and recession should be avoided, but their view of China is ambivalent,” Varga continued.
“It is evident that in the absence of a solid recovery in the Chinese economy, the outlook” for global crude demand remains mixed, he said.
