Oil prices fall close to four-month lows on China, glut worries

By Keith Wallis
SINGAPORE, July 28 (Reuters) - Oil prices fell close to four
month lows in early Asian trade on Tuesday after stock market
sell-offs on both sides of the Pacific rattled investor
sentiment about the Chinese economy, adding to concerns about a
global oil glut.
Both the dollar and euro held steady in early Asian trade
after the dollar index .DXY slipped 0.7 percent in the
previous session. The euro surged to a two-week high overnight,
which had helped to support oil prices.
"Technical levels continue to break. It's a trend which says
investors are selling," said Jonathan Barratt, chief investment
officer at Sydney's Ayers Alliance. "It's all about sentiment -
it's one-way traffic."
Uncertainty over the health of the Chinese economy,
reflected in the sell-off in Chinese stocks, lacklustre oil
demand in the United States and increasing oil supplies all
added to investors' negativity about oil prices, Barratt said.
Brent for September delivery LCOc1 dropped 53 cents to
$52.94 as of 0240 GMT after falling $1.15, or 2 percent, in the
previous session. The benchmark fell as low as $52.90
post-settlement, its lowest since mid-March
U.S. crude for September delivery CLc1 dropped 35 cents to
$47.04 a barrel after ending the previous session down 75 cents.
It fell below $47 post-settlement, the lowest since March 24.
The Chinese government will continue to buy shares to
stabilise the stock market, the country's top securities
regulator said on Monday, after major indices plunged more than
8 percent. ID:nL3N1072VY
The stock market rout in China led to falls on bourses in
Europe and the United States. ID:nL1N1072CK ID:nL1N1071J8
Barratt thought China would continue to pump-prime the
economy to stimulate demand.
"More stimulus is on the cards. But what worries me is if
(domestic) confidence gets hit, then everybody else gets hit,"
he said.
U.S. oil stocks probably saw mixed results last week, with a
modest draw in crude oil inventories countered by a gain in
gasoline stocks, a preliminary Reuters poll of analysts showed
ahead of industry and official weekly inventory reports.
ID:nL3N1075ES
Crude stocks fell by 300,000 barrels to 463.6 million
barrels in the week that ended July 24, analysts estimated. That
would be more than 100 million barrels above the five-year
seasonal average.
"We're not seeing the level of demand in the U.S. one
usually expects related to the summer drive-time," Barratt said.
"The world is awash with oil. All OPEC countries need to
sell oil to generate income," he added.
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For a 24-hr chart analysis on Brent:
http://graphics.thomsonreuters.com/US/2/PVB_20152807090104.png
For a 24-hr chart analysis on U.S. oil:
http://graphics.thomsonreuters.com/US/2/PVB_20152807082302.png
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