SINGAPORE, (AP) – Oil prices fell in Asian trading Wednesday amid a plunge in regional stock markets and expectations for lower demand from China, the world’s second-largest oil consumer.
Light, sweet crude for April delivery dropped 83 cents to $60.63 a barrel in electronic trading on the New York Mercantile Exchange mid-afternoon in Singapore. A day earlier, the contract rose 7 cents to settle at a 2-month high of $61.46 a barrel.
Brent crude contract for April delivery rose 35 cents to $60.60 a barrel on the ICE Futures exchange in London.
Global stock markets tumbled Tuesday in the wake of a 9 percent drop in Chinese shares amid speculation that Beijing may take further steps to slow China’s rapid growth — which could weaken demand for oil.
“The reaction to the fall in the Chinese stock market is really a short-term overreaction,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “The Chinese economy will remain a major growth engine in the global economy. Perhaps what’s more important is the health of the U.S. economy.”
On Wednesday, Chinese stocks bounced back nearly 4 percent, although most other Asian markets fell.
Still, oil prices aren’t like to fall much amid rising geopolitical tensions following Iran’s failure last week to meet IAEA deadline to halt its nuclear program.
“The rhetoric has been increasing over the last week or two and the Iranian issue will remain with traders,” Shum said. “Until there are indications of real supply disruptions or any military action, there will not be a major surge in prices. It will support pricing and prevent it from falling much too fast and provide a kind of balance to the Chinese stock market.”
Iran’s foreign minister, Manouchehr Mottaki, reiterated Tuesday that his country would never again suspend uranium enrichment — a move the United States insists on for any negotiations with Tehran.
The U.S. Energy Information Administration will report later Wednesday on the nation’s fuel inventories, which analysts expect to show declines in gasoline and distillate stockpiles.
Distillate inventories, which include heating oil and diesel fuel, are likely to fall by 2.6 million barrels, according to a Dow Jones Newswires survey of analysts. A winter storm that pounded the U.S. Midwest and Northeast earlier this week, dropping as much as two feet of snow in some areas, likely pushed up demand.
Gasoline stockpiles, meanwhile, are expected to decline by 1.6 million barrels, while crude oil inventories are expected to rise by 1.2 million barrels.
In the other Nymex trading, heating oil futures lost 3.78 cents to $1.7415 a gallon (3.8 liters) while April natural gas prices fell 5.1 cents to $7.482 per 1,000 cubic feet.