Oil prices sank Thursday on fresh concerns that demand could weaken if China takes more steps to control its economic growth.
Benchmark oil for March delivery lost $2.19 at $88.67 a barrel in midday trading on the New York Mercantile Exchange.
New data showed China’s economy grew 9.8 percent in the fourth quarter despite several steps that the government has taken to try to slow growth and curb surging prices.
The news sent most commodities lower as traders speculated that China’s government may try further measures to control inflation. China has had a robust appetite for commodities such as oil, copper and soybeans as its economy has boomed this year while the U.S. and Europe have seen slower growth.
“The market realizes that they’re at kind of a crossroads here and that they better take steps to slow inflation, because if they don’t, they’re going to have real problems,” PFGBest analyst Phil Flynn said of China.
The extent of any new moves by the government will be a “critical factor” for the oil market this year, Cameron Hanover said in a report. An interest rate hike or increase in reserve requirements is the type of move that has been “the overarching fear holding a number of asset prices back,” the energy consultants said.
Oil prices were also pushed down by the Energy Department’s report that showed growing U.S. stockpiles of oil, gasoline and distillates, which include heating oil and diesel fuel. All three are higher than the five-year average, an indication that energy demand remains tepid.
Natural gas prices rose after the Energy Information Administration said supplies fell more than expected last week, as very cold weather covered much the U.S. Supplies are still about 2 percent above than the five-year average.
Natural gas for March delivery added 7.4 cents at $4.650 per 1,000 cubic feet on the Nymex.
In other Nymex trading, heating oil lost 3.33 cents at $2.6229 a gallon, and gasoline gave up 5.27 cents at $2.4289 a gallon.
In London, Brent crude declined $1.50 to $96.66 a barrel on the ICE futures exchange.
- Associated Press